 Demographics and US Stock Market Fluctuations *Carlo Favero () and Andrea Tamoni CESifo Economic Studies, 2011, vol. 57, issue 1, 25-43 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) 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: journals.permissions@oup.com, Oxford University Press. Date: 2011 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:cesifo:v:57:y:2011:i:1:p:25-43 Ordering information: This journal article can be ordered from Access Statistics for this article CESifo Economic Studies is currently edited by Panu Poutvaara More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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