Anecdotal evidence from the British Railway Mania and other historical financial bubbles suggests that many investors during such episodes are naive, thus contributing to the asset price boom. Using extensive investor records, we find that very few investors during the Railway Mania can be categorized as such. Although some interpretations of the Mania suggest that naive investors were expropriated by railway insiders, our evidence is inconsistent with this view as railway insiders contributed substantial amounts of capital, and their investments performed no better than those made by other experienced investors.
Gareth Campbell is lecturer in finance at Queen's University, Belfast. His research, which has focussed on asset pricing bubbles and financial history, has been published in Economic History Review and Explorations in Economic History. He was awarded the Economic History Society New Researcher Prize in 2009.
John D. Turner is professor of finance and financial history at Queen's University, Belfast. He has been a Houblon-Norman Fellow at the Bank of England and an Alfred D. Chandler Jr. International Visiting Scholar at Harvard Business School. He has published articles on free banking, historical banking crises, law and finance, the evolution of limited liability, wealth inequality in the long-run, and the development of the Victorian e quity market. His work on these topics has been published in Business History, Economic History Review, Explorations in Economic History, and Journal of Economy History, among others. He is currently examining ownership and control of British corporations in the nineteenth century.