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Demography and the Long-Run Predictability of the Stock Market

  • Author-Name: John Geanakoplos

    (Yale University)

  • Michael Magill

    (University of Southern California)

  • Martine Quinzii

    (University of California, Davis)

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://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2004_1_bpea_papers/2004a_bpea_geanakoplos.pdf
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Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 35 (2004)
Issue (Month): 1 ()
Pages: 241-326

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Handle: RePEc:bin:bpeajo:v:35:y:2004:i:2004-1:p:241-326
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