Reaching for yield: evidence from households

Gomes, Francisco, Peng, Cameron ORCID: 0009-0008-1297-8686, Smirnova, Oksana and Zhu, Ning (2025) Reaching for yield: evidence from households. Journal of Financial Economics, 168. ISSN 0304-405X

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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.”

Item Type:	Article
Additional Information:	© 2025 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited:	11 Sep 2024 16:48
Last Modified:	24 Apr 2025 12:30
URI:	http://eprints.lse.ac.uk/id/eprint/125397

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