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

47 Pages Posted: 28 Jun 2019 Last revised: 10 Jul 2023

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Rik Frehen

Tilburg University - Department of Finance

Emiel Jerphanion

The University of Manchester - Division of Accounting and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 9, 2023

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 provide insight into the selection of traders into the loan facility by comparing the trading behavior and realized returns of borrowers to those of other traders. We find that loan holders are more likely to buy following high returns and document strong underperformance of borrowers.

Keywords: Bubble, Credit Provision, Margin Loans, Investor Behavior

JEL Classification: G01, G12, G21, N23

Suggested Citation

Braggion, Fabio and Frehen, Rik and Jerphanion, Emiel, Credit Provision and Stock Trading: Evidence From the South Sea Bubble (July 9, 2023). Available at SSRN: https://ssrn.com/abstract=3410867 or http://dx.doi.org/10.2139/ssrn.3410867

Fabio Braggion (Contact Author)

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Rik Frehen

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Emiel Jerphanion

The University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

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