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Explaining the timing of tulipmania's boom and bust: historical context, sequestered capital and market signals

  • James E. McClure (a1) and David Chandler Thomas (a1)

Framing tulipmania in terms of sequestered capital – capital whose quantities, usages and future yields are hidden from market participants – offers a richer and more straightforward explanation for this famous financial bubble than extant alternatives. Simply put, the underground planting of the tulip bulbs in 1636 blindfolded seventeenth-century Dutch speculators regarding the planted quantities and their development and future yields. The price boom began in mid November 1636, coinciding with the time of planting. The price collapse occurred in the first week of February 1637, coinciding with the time of bulb sprouting – signaling bulb quantities, development and future yields. Also consistent with our explanation is the initial price collapse location, in the Dutch city of Haarlem, where temperature and geography favored early sprouting and sprout visibility.

Corresponding author
D. C. Thomas (corresponding author), Miller College of Business, Department of Economics, Ball State University, Muncie, Indiana 47306, USA; email:
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Thanks to Cecil Bohanon, Philip Coelho, Mike Dash, Douglas French, John Horowitz, Erik Nesson and Lee Spector, and to two anonymous referees for important insight and guidance.

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Financial History Review
  • ISSN: 0968-5650
  • EISSN: 1474-0052
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