Demography and the Long-Run Predictability of the Stock Market

33 Pages Posted: 24 Sep 2002

See all articles by John Geanakoplos

John Geanakoplos

Yale University - Cowles Foundation

Michael J. P. Magill

University of Southern California - Department of Economics

Martine Quinzii

University of California, Davis - Department of Economics

Date Written: August 2002

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.

Keywords: Demography, Price Earnings Ratio, Returns, Efficient Markets, Baby-boom, Savings

JEL Classification: E21, E32, E43, E44, G12, J11

Suggested Citation

Geanakoplos, John D and Magill, Michael J. P. and Quinzii, Martine, Demography and the Long-Run Predictability of the Stock Market (August 2002). USC CLEO Research Paper No. C02-21; Cowles Foundation Discussion Paper No. 1380. Available at SSRN: https://ssrn.com/abstract=329840

John D Geanakoplos (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3397 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://cowles.econ.yale.edu/P/au/d_gean.htm

Michael J. P. Magill

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
213-740-2104 (Phone)
213-740-8543 (Fax)

Martine Quinzii

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-1567 (Phone)
530-752-9382 (Fax)

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