Shattered Housing
Journal of Financial Economics, 2024

Happel, Jonas; Karabulut, Yigitcan; Schafer, Larissa; Tuzel, Selale
Do negative housing shocks lead to persistent changes in household attitudes toward housing and homeownership? We use the residential destruction of Germany during World War II (WWII) as a quasi-experiment and exploit the reasonably exogenous region-by-cohort variation in destruction exposure. We find that WWII-experiencing cohorts from high destruction regions are significantly less likely to be homeowners decades later, controlling for regional differences and household characteristics. Underlying this effect are changes in household attitudes toward homeownership that also extend to preferences for housing consumption, with little or no support for risk preferences, income and wealth effects, or supply-side factors.

Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation
Review of Financial Studies, 2023

Braggion, Fabio; von Meyerinck, Felix; Schaub, Nic
We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations, such as consumption needs, are unlikely to drive our results.

Measuring Inflation Expectations in Interwar Britain
Economic History Review, 2023

Lennard, Jason; Meinecke, Finn; Solomou, Solomos
What caused the recovery from the British Great Depression? A leading explanation--the 'expectations channel'--suggests that a shift in expected inflation lowered real interest rates and stimulated consumption and investment. However, few studies have measured, or tested the economic consequences of, inflation expectations. In this paper, we collect high-frequency information from primary and secondary sources to measure expected inflation in the United Kingdom between the wars. A high-frequency vector autoregression suggests that inflation expectations were an important source of the early stages of economic recovery in interwar Britain.

J'Accuse! Antisemitism and Financial Markets in the Time of the Dreyfus Affair
Journal of Financial Economics, 2024

Do, Quoc-Anh; Galbiati, Roberto; Marx, Benjamin; Ortiz Serrano, Miguel A.
We study the stock market performance of firms with Jewish board members during the "Dreyfus Affair" in 19th century France. In a context of widespread latent antisemitism, initial accusations made against the Jewish officer Alfred Dreyfus led to short-lived abnormal negative returns for Jewish-connected firms. However, investors betting on these firms earned higher returns during the period corresponding to Dreyfus' rehabilitation, starting with the publication of the famous op-ed J'Accuse! in 1898. Our conceptual framework illustrates how diminishing antisemitic biases among investors might plausibly explain these effects. Our paper provides novel insights on how antisemitism can increase and decrease over short periods of time at the highest socio-economic levels in response to certain events, which in turn can affect firm value in financial markets.

The Ends of 27 Big Depressions
American Economic Review, 2024

Ellison, Martin; Lee, Sang Seok; O'Rourke, Kevin Hjortshoj
How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do so for a sample of 27 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on well-defined dates, inflationary expectations clearly rose in the wake of departure. Instrumental variable, difference-in-difference, and synthetic matching techniques suggest that the relationship is causal.