Who wins and loses in a bubble? Evidence from the British bicycle mania

How do different types of investors perform during financial bubbles? Using a rich archival source, we explore investor performance during the British bicycle mania of the 1890s. We find that directors and employees of cycle companies reduced their holdings substantially during the crash. Those holding shares after the crash were generally not from groups stereotypically thought of as naïve, but gentlemen living near a stock exchange, who had sufficient time, money, and opportunity to engage in speculation. Our findings suggest that the investors most at risk of losing during a bubble are those prone to familiarity and overconfidence biases.