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Demography and the Long-Run Predictability of the Stock MarketJohn GeanakoplosYale University - Cowles Foundation Michael J. P. MagillUniversity of Southern California - Department of Economics Martine QuinziiUniversity of California, Davis - Department of Economics August 2002 USC CLEO Research Paper No. C02-21; Cowles Foundation Discussion Paper No. 1380 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 which generates cyclical P/E ratios. We calibrate the model to roughly fit the cyclical features of historical P/E ratios.
Number of Pages in PDF File: 33 Keywords: Demography, Price Earnings Ratio, Returns, Efficient Markets, Baby-boom, Savings JEL Classification: E21, E32, E43, E44, G12, J11 working papers seriesDate posted: September 24, 2002Suggested CitationContact Information
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