Although historical asset price ‘bubbles’ are often attributed to irrationality, the empirical analysis of such episodes has been limited. This paper examines a period known as the British Railway Mania, using a new dataset and a cross-sectional methodology which is unique to the study of historical asset price reversals. The results suggest that investors successfully incorporated forecasts of short-term dividend changes into their valuations, but were unable to predict longer-term changes. When short-term growth is controlled for, it appears that the railways were priced consistently with the non-railways for almost the entire episode. These findings may imply that investors had imperfect foresight, but that they acted consistently.