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Threshold effects of population aging on stock prices

Author

Listed:
  • Juanjuan Zhuo

    (Nippon Bunri University)

  • Masao Kumamoto

    (Hitotsubashi University)

Abstract

The aim of this study is to investigate whether the changes in population age structure affect the stock prices in developed countries. Our main findings are that the proportions of population aged 20-39 and 40-64 years have an upward pressure on the stock prices, while the proportion of over 65 years has a downward pressure. Moreover, we find that if the proportion of the retired population aged over 65 years exceeds the threshold value, higher risk premium is required to compensate for the price fluctuation risks, which has a downward pressure on the stock prices. These results are consistent with both the life-cycle investment hypothesis and life-cycle risk aversion hypothesis, and are supportive for the possibility of asset meltdown hypothesis.

Suggested Citation

  • Juanjuan Zhuo & Masao Kumamoto, 2018. "Threshold effects of population aging on stock prices," Economics Bulletin, AccessEcon, vol. 38(4), pages 2313-2319.
    • Handle: RePEc:ebl:ecbull:eb-18-00962
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I4-P210.pdf
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    References listed on IDEAS

    as
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    3. Marianna Brunetti & Costanza Torricelli, 2010. "Demographics and asset returns: does the dynamics of population ageing matter?," Annals of Finance, Springer, vol. 6(2), pages 193-219, March.
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    7. Robin Brooks, 2006. "Demographic Change and Asset Prices," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Anna Park & Daniel Rees (ed.),Demography and Financial Markets, Reserve Bank of Australia.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    demographic age structure; stock prices; threshold effects;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • G1 - Financial Economics - - General Financial Markets

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