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

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  • Korevaar, Matthijs

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.

Suggested Citation

  • Korevaar, Matthijs, 2023. "Reaching for yield and the housing market: Evidence from 18th-century Amsterdam," Journal of Financial Economics, Elsevier, vol. 148(3), pages 273-296.
    • Handle: RePEc:eee:jfinec:v:148:y:2023:i:3:p:273-296
    DOI: 10.1016/j.jfineco.2023.04.004
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    More about this item

    Keywords

    Reaching for yield; Portfolio choice; House prices; Wealth inequality;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N93 - Economic History - - Regional and Urban History - - - Europe: Pre-1913

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