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Demographics, Stock Market Flows, and Stock Returns

Published online by Cambridge University Press:  06 April 2009

Amit Goyal
Amit Goyal
Affiliation:
amit_goyal@bus.emory.edu, Goizueta Business School, Emory University, 1300 Clifton Road, Atlanta, GA 30322.
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Abstract

This paper studies the link between population age structure, net outflows (dividends plus repurchases less net issues) from the stock market, and stock market returns in an overlapping generations framework. I find support for the traditional lifecycle models—the outflows from the stock market are positively correlated with the changes in the fraction of old people (65 and over) and negatively correlated with the changes in the fraction of middle-aged people (45 to 64). Changes in population age structure also add significant explanatory power to equity premium regressions. The population structure adds to the predictive power of regressions involving the investment/savings rate for the U.S. economy. Finally, international demographic changes have some power in explaining international capital flows.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 39 , Issue 1 , March 2004 , pp. 115 - 142
Copyright
Copyright © School of Business Administration, University of Washington 2004

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