Mortality, Demographic Changes, and Financial Market Outcomes

Abstract

Motivated by the systematic liquidation patterns among the elderly, we examine whether mortality-induced demographic shifts affect mutual fund flows and stock returns. We find that fund flows are more positive during high mortality months, and this mortalityflow relation is stronger among funds that older investors prefer. At the state-level, mortality predicts municipal bond fund flows, especially in U.S. states with higher income and higher elderly proportion. Using newspaper obituaries to measure mortality, we find that high mortality exposure stocks earn abnormal returns following abnormal mortality months. Known seasonal patterns in fund flows and stock returns cannot explain these findings.

Keywords: Mortality, obituaries, aging, mutual fund flows, return predictability, household finance

JEL Classification: G11, G12, G14.