Credit Provision and Stock Trading: Evidence from the South Sea Bubble

Emiel Jerphanion, Fabio Braggion, Rik Frehen

Research output: Working paperPreprint

Abstract

This paper studies the relation between credit provision and stock trading behavior. We collect every stock transaction of three major British companies during the 1720 South Sea
Bubble and link stock trading to margin loan positions with the Bank of England. We give insight in the selection of traders into the loan facility by comparing trading behavior and
realized returns of borrowers to other traders. We find that loan holders are more likely to buy following high returns and document strong underperformance of borrowers.
Original languageEnglish
Place of PublicationJournal of Financial and Quantitative Analysis
PublisherCambridge University Press
Number of pages48
DOIs
Publication statusAccepted/In press - 16 Oct 2023

Publication series

NameJournal of Financial and Quantitative Analysis
PublisherCambridge University Press
ISSN (Print)0022-1090

Keywords

  • Credit
  • Bubble
  • Margin Loans
  • Investor biases

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