Myopic Rationality in a Mania

50 Pages Posted: 6 Jan 2015

Date Written: January 1, 2012


The rationality of investors during asset price bubbles has been the subject of considerable debate. An analysis of the British Railway Mania, which occurred in the 1840s, suggests that investors may have been myopic, as their expectations were only accurate in the short-term, but they remained rational, as they acted in a utility maximising manner given their expectations. Investors successfully incorporated forecasts of short-term dividend changes into their valuations, but were unable to predict longer-term changes. When short-term growth is controlled for, it appears that the railways were priced consistently with the non-railways throughout the entire episode.

Suggested Citation

Campbell, Gareth, Myopic Rationality in a Mania (January 1, 2012). Explorations in Economic History, Vol. 49, No. 1, 2012. Available at SSRN:

Gareth Campbell (Contact Author)

Queen's University Belfast ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

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