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.

Independent Regulators and Financial Stability Evidence from Gubernatorial Election Campaigns in the Progressive Era
Journal of Financial Economics, 2024

Del Angel, Marco; Richardson, Gary
Regulatory independence forms a foundation for modern financial systems. The institutions' value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors' supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics' impact on banks and the economy.

Why Did Shareholder Liability Disappear?
Journal of Financial Economics, 2024

Bogle, David A.; Campbell, Gareth; Coyle, Christopher; Turner, John D.
Why did shareholder liability disappear? We address this question by looking at its use by British insurance companies until its complete disappearance. We explore three possible explanations for its demise: (1) regulation and government-provided policyholder protection meant that it was no longer required; (2) it had become de facto limited; and (3) shareholders saw an opportunity to expunge something they disliked when insurance companies grew in size. Using hand-collected archival data, our findings suggest investors attached a risk premium to companies with shareholder liability, and it was phased out as insurance companies expanded, which meant that they were better able to pool risks.

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.

Reaching for Yield and the Housing Market: Evidence from 18th-Century Amsterdam
Journal of Financial Economics, 2023

Korevaar, Matthijs
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.