Deriving the Railway Mania

Financial History Review (2013) vol 20, no. 1, pp. 1-27

44 Pages Posted: 6 Jan 2015

Date Written: April 1, 2013


This paper argues that the promotion boom, which occurred in the railway industry during the mid-1840s, was amplified by the issue of derivative-like assets which let investors take highly leveraged positions in the shares of new railway companies. The partially paid shares which the new railway companies issued allowed investors to obtain exposure to an asset by paying only a small initial deposit. The consequence of this arrangement was that investor returns were substantially amplified, and many schemes could be financed simultaneously. However, when investors were required to make further payments it put a negative downward pressure on prices.

Suggested Citation

Campbell, Gareth, Deriving the Railway Mania (April 1, 2013). Financial History Review (2013) vol 20, no. 1, pp. 1-27. 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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