Dutch Tulip Bulb Market Bubble

DEFINITION of 'Dutch Tulip Bulb Market Bubble'

One of the most famous market bubbles of all time, which occurred in Holland during the early 1600s when speculation drove the value of tulip bulbs to extremes. At the height of the market, the rarest tulip bulbs traded for as much as six times the average person's annual salary.

BREAKING DOWN 'Dutch Tulip Bulb Market Bubble'

The tulip was brought to Europe in the middle of the sixteenth century from the Ottoman Empire. Holland's upper classes soon competed for the rarest bulbs as tulips became a status symbol.

By 1636, tulip bulbs were traded on the stock exchanges of numerous Dutch towns and cities, encouraging all members of society to speculate in the markets. Many people traded or sold possessions to participate in the tulip market mania. Like any bubble, it all came to an end in 1637, when prices dropped and panic selling began. Bulbs were soon trading at a fraction of what they once had, leaving many people in financial ruin.

RELATED TERMS
  1. Froth

    Market conditions preceding an actual market bubble where asset ...
  2. Tulipmania

    Tulipmania was the first major financial bubble. Investors began ...
  3. Speculative Bubble

    A spike in asset values within a particular industry, commodity, ...
  4. Bubble Company

    A company whose valuation greatly exceeds that suggested by its ...
  5. Mississippi Company

    An example of a famous speculative bubble that occurred from ...
  6. Bubble Theory

    A school of thought that believes that the prices of assets can ...
Related Articles
  1. Markets

    Five Of The Largest Asset Bubbles In History

    The five bubbles discussed here were among the biggest in history; their lessons should be heeded.
  2. Markets

    Economic Bubble: Toil And Trouble!

    You might like the idea of profiting from a bubble, but you’d probably like to avoid suffering from its aftermath. Here is how an economic bubble works.
  3. Managing Wealth

    Globalization and the Butterfly Effect

    Discover how the butterfly effect applies to global capital markets and witness how chaos theory can describe market volatility.
  4. Markets

    Best 7 Money Saving Tips for Your Electric Bill

    Learn how to make simple changes around the home to save on your electric bill, such as fixing drafty windows and switching to compact fluorescent light bulbs.
  5. Personal Finance

    Fight the New Attack on Your Utility Bill

    Guard against stealth attempts to increase utility rates as you reduce your monthly costs with these inexpensive tips.
  6. Markets

    Should the Fed Be More Worried About Asset Bubbles?

    While the Fed should be concerned that assets bubbles might impact economic stability, monetary policy is not the best tool to mitigate this threat.
  7. Markets

    How Does a Bubble Form and Burst?

    A bubble forms when prices grow beyond their true value.
  8. Investing

    5 Painless Ways To Save More Money

    Saving money can be a chore, but these tricks put money in your pocket with no effort at all.
  9. Markets

    5 Steps of a Bubble

    In the financial sense, a bubble refers to a situation where the price of an asset far exceeds its fundamental value.
  10. Markets

    How Do Asset Bubbles Cause Recessions?

    Understand how asset bubbles often lead to deep, protracted recessions. Read about historical examples of recessions preceded by asset bubbles.
RELATED FAQS
  1. What was the first company to issue stock?

    The Dutch East India Company undertook the world's first IPO and, therefore, became the first public company to issue stock. ... Read Answer >>
  2. What do people mean when they say there is a "bubble" going on in the market, such ...

    A financial "bubble" refers to a situation where there is a relatively high level of trading activity on a particular asset ... Read Answer >>
  3. What is an echo bubble?

    To understand the term "echo bubble", you have to understand what a bubble is. A financial or economic bubble occurs when ... Read Answer >>
  4. What was the South Seas bubble?

    The British East India Company introduced England to the joys of corporate finance. The company enjoyed a government-backed ... Read Answer >>
  5. Can the Efficient Market Hypothesis explain economic bubbles?

    Learn about the nuanced relationship between the efficient market hypothesis and economic bubbles and the requirements and ... Read Answer >>
  6. What can capitalization rate tell investors about real estate bubbles?

    Learn about capitalization rates and what information investors may glean from them with regard to bubbles. Explore how rates ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center