Dutch Tulip Bulb Market Bubble

AAA

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.

INVESTOPEDIA EXPLAINS '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. Bubble Company

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

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

    An example of a famous speculative bubble that occurred from ...
  4. Sell-Off

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

    1. An economic cycle characterized by rapid expansion followed ...
  6. Crash

    A sudden and significant decline in the value of a market. A ...
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  2. Active Trading Fundamentals

    How The Power Of The Masses Drives The Market

    Market psychology is an undeniably powerful force. Find out what you can do about it.
  3. Active Trading

    The Financial Markets: When Fear And Greed Take Over

    If these unpleasant emotions are allowed to influence your decision-making, they may cost you dearly.
  4. Economics

    Economic Meltdowns: Let Them Burn Or Stamp Them Out?

    Whether the Fed should intervene in market bubbles is up for debate. Learn about both sides here.
  5. Budgeting

    The Greatest Market Crashes

    From a tulip craze to a dotcom bubble, read the cautionary tales of the stock market's greatest disasters.
  6. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...
  7. Investing

    3 Major Risks For Annaly’s Investors

    Thanks to its double-digit dividend yield, Annaly Capital Management has long been a favorite among income-seeking investors.
  8. Credit & Loans

    Which Is One Of The Nation’s Safest Banks?

    While there's no such thing as a completely safe bank stock, it's hard to find one that comes closer to the mark than New York Community Bancorp .
  9. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  10. Economics

    The New Global Banking Regulations To Avert Future Crisis

    These are the types of policies that are being developed to minimize the risks posed to the global financial system by banks which are too big to fail.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center