NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rik G.P. Frehen

Tilburg University

E-Mail: r.g.p.frehen@uvt.nl

NBER Working Papers and Publications

July 2014Dutch Securities for American Land Speculation in the Late Eighteenth Century
with William N. Goetzmann, K. Geert Rouwenhorst
in Housing and Mortgage Markets in Historical Perspective, Eugene N. White, Kenneth Snowden, and Price Fishback, editors
The end of the 18th century was one of the most innovative periods in the history of securitization. Public markets for mortgage-backed securities are among the most interesting developments of the period. In The Netherlands, a network of merchant investment bankers used sophisticated methods for structuring loans based on overseas properties as collateral. In 1793, the Holland Land Company issued two structured notes to purchase millions of acres in Western New York. In 1794, the purchase and development of property in the newly-designated capital city of Washington D.C. was financed by mortgage-backed bonds underwritten by Dutch merchants. These securities raise questions about why investors trusted in the value of overseas property as collateral, and whether the expected rates of return...
September 2009New Evidence on the First Financial Bubble
with William N. Goetzmann, K. Geert Rouwenhorst: w15332
The first global financial bubble in stock prices occurred 1720 in Paris, London and the Netherlands. Explanations for these linked bubbles primarily focus on the irrationality of investor speculation and the corresponding stock price behavior of two large firms: the South Sea Company in Great Britain and the Mississippi Company in France. In this paper we examine a broad cross‐section of security price data to evaluate the causes of the bubbles. Using newly collected stock prices for British and Dutch firms in 1720, we find evidence against indiscriminate irrational exuberance and evidence in favor of speculation about two factors: the Atlantic trade and the incorporation of insurance companies. We study the role of innovation in the insurance market by examining market betas and volatili...

Published: Frehen, Rik G.P. & Goetzmann, William N. & Geert Rouwenhorst, K., 2013. "New evidence on the first financial bubble," Journal of Financial Economics, Elsevier, vol. 108(3), pages 585-607. citation courtesy of

 
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