IDEAS home Printed from
   My bibliography  Save this article

Demographics and US Stock Market Fluctuations


  • Carlo A. Favero
  • Andrea Tamoni


This article illustrates how the information component determining long-horizon US stock market returns can be related to a demographic variable, MY the ratio of middle-aged to young adults. In fact, MY can be seen as the major determinants of a slowly evolving time-varying mean of the dividend/price ratio. A forecasting model for stock market returns over a century of US annual data that uses as predictors the dividend/price ratio and MY overcomes all the statistical difficulties related to the high persistence of the dividend/price ratio and performs very well in forecasting long-horizon stock market returns. Moreover, the use of demographic variables as a predictor for long-run stock market returns delivers a steeply downward sloping term structure of stock market risk. (JEL codes: G17, C53, E44) Copyright The Author 2010. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email:, Oxford University Press.

Suggested Citation

  • Carlo A. Favero & Andrea Tamoni, 2011. "Demographics and US Stock Market Fluctuations ," CESifo Economic Studies, CESifo, vol. 57(1), pages 25-43, March.
  • Handle: RePEc:oup:cesifo:v:57:y:2011:i:1:p:25-43

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:cesifo:v:57:y:2011:i:1:p:25-43. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.