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Do Demographic Changes Affect Risk Premiums? Evidence from International Data

Andrew Ang

BlackRock, Inc

Angela Maddaloni

European Central Bank (ECB)

January 2003

ECB Working Paper No. 208

We examine the link between equity risk premiums and demographic changes using a very long sample over the whole twentieth century for the US, Japan, UK, Germany and France, and a shorter sample covering the last third of the twentieth century for fifteen countries. We find that demographic variables significantly predict excess returns internationally. However, the demographic predictability found in the US by past studies for the average age of the population does not extend to other countries. Pooling international data, we find that, on average, faster growth in the fraction of retired persons significantly decreases risk premiums. This demographic predictability of risk premiums is stronger for countries with well-developed social security systems and lesser-developed financial markets.

Number of Pages in PDF File: 59

Keywords: Population aging, demography, risk premiums, international predictability, social security

JEL Classification: G12, G15, J10, P46

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Date posted: February 4, 2003  

Suggested Citation

Ang, Andrew and Maddaloni, Angela, Do Demographic Changes Affect Risk Premiums? Evidence from International Data (January 2003). ECB Working Paper No. 208. Available at SSRN: https://ssrn.com/abstract=376232

Contact Information

Andrew Ang (Contact Author)
BlackRock, Inc ( email )
55 East 52nd Street
New York City, NY 10055
United States
Angela Maddaloni
European Central Bank (ECB) ( email )
Sonnemannstrasse 22
Frankfurt am Main, 60314

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