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Reaching for yield: Evidence from households

Author

Listed:
  • Gomes, Francisco
  • Peng, Cameron
  • Smirnova, Oksana
  • Zhu, Ning

Abstract

The literature has documented “reaching for yield”—the phenomenon of investing more in risky assets when interest rates drop—among institutional investors. We analyze detailed transaction data from a large brokerage firm to provide direct field evidence that individual investors also exhibit this behavior. Consistent with models of portfolio choice with labor income, reaching for yield is more pronounced among younger and less-wealthy individuals. Consistent with prospect theory, reaching for yield is more pronounced when investors are trading at a loss. Finally, we observe and discuss the phenomenon of “reverse reaching for yield.”

Suggested Citation

  • Gomes, Francisco & Peng, Cameron & Smirnova, Oksana & Zhu, Ning, 2025. "Reaching for yield: Evidence from households," Journal of Financial Economics, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:jfinec:v:168:y:2025:i:c:s0304405x25000650
    DOI: 10.1016/j.jfineco.2025.104057
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    More about this item

    Keywords

    Reaching for yield; Portfolio choice; Retail investors; Prospect theory;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G50 - Financial Economics - - Household Finance - - - General

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