The anatomy of a bubble company : The London Assurance in 1720

Acheson, Graeme and Aldous, Michael and Quinn, William (2023) The anatomy of a bubble company : The London Assurance in 1720. Economic History Review. ISSN 0013-0117 (

[thumbnail of Acheson-etal-EHR-2023-The-anatomy-of-a-bubble-company]
Text. Filename: Acheson_etal_EHR_2023_The_anatomy_of_a_bubble_company.pdf
Final Published Version
License: Creative Commons Attribution 4.0 logo

Download (485kB)| Preview


The London Assurance Company (LA), which incorporated during the bubble of 1720, experienced more dramatic price movements in its shares than the South Sea Company. This paper examines how incorporating during the bubble affected its long run performance. We show that the bubble in the Company's share price was partly attributable to changes in market structure during the share issuance process. As a result of the bubble, the Company's original subscribers, who had been curated for expertise and political connections, overwhelmingly exited during 1720 and were replaced by unsuccessful speculators. Analysis of LA shareholder behaviour up to 1737 suggests that this loss of shareholder expertise had detrimental consequences for the Company's performance. These results demonstrate how a bubble in the shares of a newly created company can lead to an exodus of value-adding investors, damaging the company's long-term prospects.