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Demographics And Financial Asset Prices In The Major Industrial Economies

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Author Info
E Philip Davis
Christine Li

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Abstract

This paper explores the relationship between demographics and aggregate financial asset prices in 7 OECD countries over the past 50 years. Unlike most extant work it adopts an international as well as US focus, and also includes non-demographic variables usually considered to influence asset prices in the econometric specification. Furthermore, we examine effects on bond yields as well as share prices.The results indicate a significant link between panel, international and US demographics on the one hand, and real stock prices and real bond yields on the other. The international results are of particular interest given their robustness and the logic of international financial integration. Generally, an increase in the fraction of middle-aged people (aged 40-64) tends to boost real asset prices. A corollary is that a decline in this cohort in coming decades will tend to weaken them. More tentative results including estimated effects of the over-65 cohort in the US suggest a more severe downturn is possible, thus underlining the potential market risks associated with sole reliance on fully funded pension schemes.

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Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 03-07.

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Length: 37 pages
Date of creation: Mar 2003
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Handle: RePEc:bru:bruedp:03-07

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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK

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  1. Brennan, Michael J & Cao, H Henry, 1997. " International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-80, December. [Downloadable!] (restricted)
  2. Andrew B. Abel, 2001. "Will Bequests Attenuate The Predicted Meltdown In Stock Prices When Baby Boomers Retire?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 589-595, November. [Downloadable!] (restricted)
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  3. Andrew B. Abel, 2002. "The effects of a baby boom on stock prices and capital accumulation in the presence of Social Security," Working Papers 03-2, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  4. Michael J. Brennan. and H. Henry Cao., 1997. "International Portfolio Investment Flows," Research Program in Finance Working Papers RPF-271, University of California at Berkeley. [Downloadable!]
  5. Bakshi, Gurdip S & Chen, Zhiwu, 1994. "Baby Boom, Population Aging, and Capital Markets," Journal of Business, University of Chicago Press, vol. 67(2), pages 165-202, April. [Downloadable!] (restricted)
  6. Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics. [Downloadable!]
  7. Robin Brooks, 2000. "What Will Happen to Financial Markets When the Baby Boomers Retire?," IMF Working Papers 00/18, International Monetary Fund.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Erik Lueth, 2008. "Capital Flows and Demographics--An Asian Perspective," IMF Working Papers 08/8, International Monetary Fund. [Downloadable!]
  2. Dariusz Stanko, 2003. "Polish Pension Funds, Does The System Work? Cost, Efficiency and Performance MeasurementIssues," Public Economics 0302001, EconWPA. [Downloadable!]
  3. 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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  4. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research. [Downloadable!]
  5. Stefan W. Schmitz, 2005. "Demographic Developments, Funded Pension Provision and Financial Stability," Finance 0510023, EconWPA. [Downloadable!]
    Other versions:
  6. 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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