Reaching for Yield and the Housing Market: Evidence from 18th-century Amsterdam
69 Pages Posted: 17 Mar 2021 Last revised: 11 Nov 2021
Date Written: November 3, 2021
How do periods of low interest rates affect investor demand for housing and the evolution of house prices? This paper studies this question in the unique setting of 18th century Amsterdam, combining archival data on investment portfolios, property transactions, and housing yields. Exploiting shocks in the supply of safe government bonds, I show that wealthy investors shifted their portfolios towards higher-yielding real estate when bond yields were low and decreasing. This behavior caused a large boom and bust in house prices and yields, and increased housing wealth inequality.
Keywords: reaching for yield, portfolio choice, house prices, financial history
JEL Classification: G11, G12, R31, N23, N93
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