Explaining the timing of tulipmania's boom and bust: historical context, sequestered capital and market signals

Author:

McClure James E.,Thomas David Chandler

Abstract

Framing tulipmania in terms of sequestered capital – capital whose quantities, usages and future yields are hidden from market participants – offers a richer and more straightforward explanation for this famous financial bubble than extant alternatives. Simply put, the underground planting of the tulip bulbs in 1636 blindfolded seventeenth-century Dutch speculators regarding the planted quantities and their development and future yields. The price boom began in mid November 1636, coinciding with the time of planting. The price collapse occurred in the first week of February 1637, coinciding with the time of bulb sprouting – signaling bulb quantities, development and future yields. Also consistent with our explanation is the initial price collapse location, in the Dutch city of Haarlem, where temperature and geography favored early sprouting and sprout visibility.

Publisher

Cambridge University Press (CUP)

Subject

Finance,History

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3. The tulip mania in Holland in the years 1636 and 1637;Posthumus;Journal of Economic and Business History,1928

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