Skip Navigation

Demographics and US Stock Market Fluctuations*

  1. Andrea Tamoni‡
  1. †Department of Finance, Bocconi University, Milan, Italy, IGIER & CEPR. e-mail: carlo.favero{at}unibocconi.it
  2. ‡Department of Finance, Bocconi University, Milan, Italy. e-mail: andrea.tamoniphd.unibocconi.it

Abstract

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)

Key words

| Table of Contents

This Article

  1. CESifo Economic Studies 57 (1): 25-43. doi: 10.1093/cesifo/ifq011 First published online: July 11, 2010
  1. » AbstractFree
  2. Full Text (HTML)
  3. Full Text (PDF)
  4. All Versions of this Article:
    1. ifq011v1
    2. 57/1/25 most recent

Classifications

Share

  1. Email this article

Current Issue

  1. September 2016 62 (3)
  1. CESifo Economic Studies
  1. Alert me to new issues

Most

Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.