The Baby Boom and the Stock Market Boom

Brown University, Economics Working Paper No. 03-07

24 Pages Posted: 5 Jun 2003

See all articles by David N. Weil

David N. Weil

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Kyung-Mook Lim

Korea Development Institute (KDI) - Money and Finance Division

Multiple version iconThere are 2 versions of this paper

Date Written: March 10, 2003

Abstract

This paper addresses two issues. The first is whether demographic change was plausibly responsible for the run-up in stock prices over the last decade, and whether the attempt by the baby boom cohort to cash out of its investments in the period 2010-30 might lead to an "asset meltdown." The second issue is whether the rise in dependency that will accompany the retirement of the baby boom cohort calls for an increase in national saving. We analyze these issues using a forward-looking macro-demographic model, and show that they are related via the existence of installation costs for capital. If such costs are sufficiently large, then demographics do have the power to affect stock prices, but "saving for America's old age" is less optimal. However, conventional estimates of capital installation costs are not large enough to explain large stock price movements in response to actual demographic change.

Suggested Citation

Weil, David Nathan and Lim, Kyung-Mook, The Baby Boom and the Stock Market Boom (March 10, 2003). Brown University, Economics Working Paper No. 03-07. Available at SSRN: https://ssrn.com/abstract=399742 or http://dx.doi.org/10.2139/ssrn.399742

David Nathan Weil (Contact Author)

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-1754 (Phone)
401-863-1970 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kyung-Mook Lim

Korea Development Institute (KDI) - Money and Finance Division ( email )

Seoul 130-012
United States

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