Price momentum and the 1719-20 bubbles: A method to compare and interpret booms and crashes in asset markets

Condorelli, Stefano (2018). Price momentum and the 1719-20 bubbles: A method to compare and interpret booms and crashes in asset markets (Unpublished) München: Munich Personal RePEc Archive

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This paper attempts to address one major problem with bubble studies: the difficulty to rigorously compare assets bubbles (that is to say compare them via quantitative data, rather than simply anecdotal evidence). The idea of the paper is to use a metric that is not the level of price itself, but that is connected to it. This metric is price momentum (i.e. the magnitude and speed of price changes). Momentum is measured with a technical indicator: the Relative Strength Index (RSI). The RSI is popular among traders, yet it is not normally used as a tool of comparison. In particular, there appears to be no academic study that has hitherto employed the RSI as a metric to compare different booms and crashes. Likewise, it seems that the RSI was never applied to early modern markets (such as the Mississippi and South Sea Bubbles), or to early 20th century markets (such as the 1929 crash). The paper does all this (based on historical securities prices). Furthermore, it develops news concepts and metrics (such as “strong momentum with low volatility”, “momentum efficiency”, and accumulated RSI readings) that are connected to the notion of momentum. These concepts, in turn, are interpreted through the lens of archival evidence. The result is a new method of analysis – which is not concerned with market forecasting, but only with comparison and historical interpretation – that sheds new light on the 1719-20 bubbles themselves.

Item Type:

Working Paper


06 Faculty of Humanities > Other Institutions > Walter Benjamin Kolleg (WBKolleg) > Center for Global Studies (CGS)

UniBE Contributor:

Condorelli, Stefano


300 Social sciences, sociology & anthropology > 330 Economics
900 History


Munich Personal RePEc Archive




Stéphane Orazio Maurice Condorelli

Date Deposited:

16 Dec 2019 11:33

Last Modified:

16 Dec 2019 11:33

Uncontrolled Keywords:

Financial history, South Sea Bubble, Mississippi Bubble, Dutch Wind Trade, Relative Strength Index, momentum, volatility, stock market bubbles and crashes, euphoria




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