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Baby Boom, Population Aging, and Capital Markets

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Author Info
Bakshi, Gurdip S
Chen, Zhiwu
Abstract

This article tests how demographic changes affect capital markets. The life-cycle investment hypothesis states that at an early stage an investor allocates more wealth in housing and then switches to financial assets at a later stage. Consequently, the stock market should rise but the housing market should decline with the average age, a prediction supported in the post-1945 period. The second hypothesis that an investor's risk aversion increases with age is tested by estimating the resulting Euler equation and supported in the post-1945 period. A rise in average age is found to predict a rise in risk premiums. Copyright 1994 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 67 (1994)
Issue (Month): 2 (April)
Pages: 165-202
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Handle: RePEc:ucp:jnlbus:v:67:y:1994:i:2:p:165-202

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  1. Andrew Ang & Angela Maddaloni, 2003. "Do demographic changes affect risk premiums? Evidence from international data," Working Paper Series 208, European Central Bank. [Downloadable!]
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  2. Kevin C. Cheng, 2003. "Economic Implications of China's Demographics in the 21st Century," IMF Working Papers 03/29, International Monetary Fund. [Downloadable!]
  3. Peter S. Yoo, 1994. "Age distributions and returns of financial assets," Working Papers 1994-002, Federal Reserve Bank of St. Louis. [Downloadable!]
  4. John Y. Campbell & Robert J. Shiller, 2001. "Valuation Ratios and the Long-run Stock Market Outlook: An Update," Cowles Foundation Discussion Papers 1295, Cowles Foundation, Yale University. [Downloadable!]
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  5. John Geanakoplos & Michael Magill & Martine Quinzii, 2002. "Demography and the Long-run Predictability of the Stock Market," Cowles Foundation Discussion Papers 1380, Cowles Foundation, Yale University. [Downloadable!]
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  6. Roberto A. De Santis & Melanie Lührmann, 2006. "On the determinants of external imbalances and net international portfolio flows - a global perspective," Working Paper Series 651, European Central Bank. [Downloadable!]
  7. E Philip Davis & Christine Li, 2003. "Demographics And Financial Asset Prices In The Major Industrial Economies," Public Policy Discussion Papers 03-07, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
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  8. William N. Goetzmann & Massimo Massa, 1999. "Index Funds and Stock Market Growth," NBER Working Papers 7033, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Kurkalova, Lyubov A. & Kling, Catherine L. & Zhao, Jinhua, 2001. "Subsidy for Adopting Conservation Tillage: Estimation from Observed Behavior (The)," Staff General Research Papers 2007, Iowa State University, Department of Economics. [Downloadable!]
  10. Kurkalova, Lyubov & Kling, Catherine & Zhao, Jinhua, 2001. "The Subsidy For Adopting Conservation Tillage: Estimation From Observed Behavior," 2001 Annual meeting, August 5-8, Chicago, IL 20542, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  11. Peter S. Yoo, 1997. "Population growth and asset prices," Working Papers 1997-016, Federal Reserve Bank of St. Louis. [Downloadable!]
  12. Michael Magill, 2004. "Demography and the Stock Market," Theory workshop papers 658612000000000080, UCLA Department of Economics. [Downloadable!]
  13. John Geanakoplos & Michael Magill & Martine Quinzii, 2003. "Demography and the Long Run Behavior of the Stock Market," Levine's Bibliography 506439000000000269, UCLA Department of Economics. [Downloadable!]
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  14. Andrea Tamoni & Arie E.Gozluklu & Carlo A.Favero, 2008. "Demographics and fluctuations in Dividend/Price," Working Papers 345, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  15. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. James Poterba, 2004. "The Impact of Population Aging on Financial Markets," NBER Working Papers 10851, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Kyung-Mook Lim & David N. Weil, 2003. "The Baby Boom and the Stock Market Boom," Working Papers 2003-07, Brown University, Department of Economics. [Downloadable!]
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  18. Robin Brooks, 2006. "Demographic Change and Asset Prices," RBA Annual Conference Volume, in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia. [Downloadable!]
  19. David S. Gerber & René Weber, 2007. "Aging, Asset Allocation, and Costs: Evidence for the Pension Fund Industry in Switzerland," IMF Working Papers 07/29, International Monetary Fund. [Downloadable!]
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