Dutch Tulip Bulb Market Bubble

A A A

DEFINITION

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.



INVESTOPEDIA EXPLAINS

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. Bubble Company

    A company whose valuation greatly exceeds that suggested by its fundamentals. ...
  2. Tulipmania

    Tulipmania was the first major financial bubble. Investors began to madly purchase ...
  3. Mississippi Company

    An example of a famous speculative bubble that occurred from 1719-1720. In 1715 ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The ...
  5. Crash

    A sudden and significant decline in the value of a market. A crash is most often ...
  6. Bubble

    1. An economic cycle characterized by rapid expansion followed by a contraction. ...
  7. Global Recession

    An extended period of economic decline around the world. The International Monetary ...
  8. The Great Recession

    The steep decline in economic activity during the late 2000s, which is generally ...
  9. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default beginning in ...
  10. Lost Decade

    The 1990s for Japan, and the first decade of the current millennium for the ...
Related Articles
  1. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

  2. How The Power Of The Masses Drives The ...
    Active Trading Fundamentals

    How The Power Of The Masses Drives The ...

  3. The Financial Markets: When Fear And ...
    Active Trading

    The Financial Markets: When Fear And ...

  4. Economic Meltdowns: Let Them Burn Or ...
    Economics

    Economic Meltdowns: Let Them Burn Or ...

  5. The Greatest Market Crashes
    Budgeting

    The Greatest Market Crashes

  6. When Financial Crisis Strikes The Bank ...
    Budgeting

    When Financial Crisis Strikes The Bank ...

  7. Are We Setting Ourselves Up For Another ...
    Economics

    Are We Setting Ourselves Up For Another ...

  8. How the Case Against BofA's Ken Lewis ...
    Investing News

    How the Case Against BofA's Ken Lewis ...

  9. What Is A Pyramid Scheme?
    Active Trading

    What Is A Pyramid Scheme?

  10. What is the Dodd-Frank Act? How does ...
    Economics

    What is the Dodd-Frank Act? How does ...

comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center