Korevaar, M. (2023). Reaching for yield and the housing market: Evidence from 18th-century Amsterdam Journal of Financial Economics, 148(3):273--296.
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Affiliated authorMatthijs Korevaar
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Publication year2023
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JournalJournal of Financial Economics
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.