Speculation in the United Kingdom, 1785‒2019

Speculation has long been thought to have significant economic effects, but it is difficult to measure, making it challenging to examine these effects empirically. In this paper we measure speculation in the United Kingdom since 1785 by using business and financial reporting in The Times newspaper. Our monthly speculation index reveals four distinct epochs of speculation in the United Kingdom. Epochs of high speculation coincide with higher stock market returns and higher economic growth, while low-speculation periods coincide with high levels of government debt and financial repression. We find that low interest rates foment the development of higher speculation, and that eras of higher speculation are often followed by greater banking instability.