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Demography and the Long-run Predictability of the Stock Market

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Abstract

Stock market price/earnings ratios should be influenced by demography. Since demography is predictable, stock returns should be as well. We provide a simple stochastic OLG model with a cyclical structure that generates cyclical P/E ratios. We calibrate the model to roughly fit the cyclical features of historical P/E ratios.

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File URL: http://cowles.econ.yale.edu/P/cd/d13b/d1380.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1380.

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Length: 32 pages
Date of creation: Aug 2002
Date of revision:
Publication status: Published in Brookings Papers on Economic Activity, 1, 2004
Handle: RePEc:cwl:cwldpp:1380

Note: CFP 1099
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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Keywords: Demography; Price earnings ratio; Returns; Efficient markets; Baby-boom; Savings;

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References

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  22. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  23. Basu, Parantap, 1987. "An Adjustment Cost Model of Asset Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 609-21, October.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. L'impact de la démographie sur le prix des actifs
    by bertrandachou@orange.fr (Bertrand Achou) in BS Initiative on 2013-12-19 04:43:28
  2. L'impact de la démographie sur le prix des actifs
    by bertrandachou@orange.fr (Bertrand Achou) in BS Initiative on 2013-12-19 04:43:28
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