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

Matthijs Korevaar

doi:10.1016/j.jfineco.2023.04.004

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

Matthijs Korevaar

Business Economics

Research output: Contribution to journal › Article › Academic › peer-review

2 Citations (Scopus)

9 Downloads (Pure)

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.

Original language	English
Pages (from-to)	273-296
Number of pages	24
Journal	Journal of Financial Economics
Volume	148
Issue number	3
DOIs	https://doi.org/10.1016/j.jfineco.2023.04.004
Publication status	Published - Jun 2023

Bibliographical note

Funding Information:
Nikolai Roussanov was the editor for this article. This paper is based on Chapter 5 of my dissertation, and I would like to thank my advisors Piet Eichholtz and Thies Lindenthal for their guidance. I thank the editor and an anonymous referee for valuable comments and suggestions. I also thank Christiaan van Bochove, Matteo Bonetti, John Cochrane, Jan De Vries, Price Fishback, Oscar Gelderblom, William Goetzmann, Joost Jonker, Ad Knotter, David Ling, Peter Koudijs, Pierre Mabille, Nagihan Mimiroglu, Stijn van Nieuwerburgh, Rodney Ramcharan, Enrico Perotti, Jean-Laurent Rosenthal, Peter Schotman, Paul Smeets, Christophe Spaenjers, Tim van der Valk, Kairong Xiao, and participants at various conferences and seminars for helpful discussions. I thank Francine Tinnemans for excellent research assistance and the staff of the Amsterdam Archives for the provision of archival data. The author acknowledges financial support from the Netherlands Organization for Scientific Research ( 406.16.552 ), the Economic History Association, the Lincoln Institute of Land Policy , and the Marie-Sklodowksa Curie Fellowship from the European Union ( 101.028821 ).

Publisher Copyright:
© 2023 The Author(s)

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10.1016/j.jfineco.2023.04.004

1-s2.0-S0304405X23000648-mainFinal published version, 1.36 MBLicence: CC BY

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

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