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Asset Pricing Implications of Demographic Change

97 Pages Posted: 11 May 2011 Last revised: 20 Jan 2017

Thomas Andreas Maurer

Washington University in St. Louis - John M. Olin Business School; London School of Economics & Political Science (LSE)

Date Written: January 19, 2017

Abstract

I solve an overlapping generations model featuring stochastic birth and death rates in general equilibrium. I provide sufficient conditions for the interest rate to be low and the equity premium high during times of high birth and low mortality rates. These qualitative results are consistent with the data. Demographic changes further explain a sizable term premium in long term bonds and a substantial time variation in the real interest rate, equity premium and conditional stock price volatility.

Keywords: baby boom, demographic, transition, uncertainty, overlapping generations, intertemporal consumption choice, long run risk, general equilibrium

JEL Classification: G11, G12, G17, D51, D91

Suggested Citation

Maurer, Thomas Andreas, Asset Pricing Implications of Demographic Change (January 19, 2017). 24th Australasian Finance and Banking Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1836483 or http://dx.doi.org/10.2139/ssrn.1836483

Thomas Andreas Maurer (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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