Reaching for yield and the housing market: Evidence from 18th-century Amsterdam

Matthijs Korevaar

Journal of Financial Economics, 2023, vol. 148, issue 3, 273-296

Abstract: Do investors reach for yield when interest rates are low and does this behavior affect the housing market? Using the unique setting and data of 18th-century Amsterdam, I show that reach-for-yield behavior of wealthy investors resulted in a large boom and bust in house prices and major changes in rental yields. Exploiting changes in the supply of bonds, I show that investors living off capital income shifted their portfolios towards real estate and other higher-yielding assets when bond yields were low and decreasing. This behavior exacerbated house price volatility and increased housing wealth inequality.

Keywords: Reaching for yield; Portfolio choice; House prices; Wealth inequality (search for similar items in EconPapers)
JEL-codes: G11 G12 N23 N93 R31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:148:y:2023:i:3:p:273-296

DOI: 10.1016/j.jfineco.2023.04.004

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