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Do Demographic Changes Affect Risk Premiums? Evidence from International Data

Author

Listed:
  • Andrew Ang

    (Columbia University and National Bureau of Economic Research)

  • Angela Maddaloni

    (European Central Bank)

Abstract

We examine the link between equity risk premiums and demographic changes using a long sample for the United States, Japan, United Kingdom, Germany, and France and a shorter sample for 15 countries. We find demographic variables significantly predict excess returns internationally. However, the demographic predictability previously found in the United States for the average population age does not extend to other countries. Pooling international data, we find, on average, faster growth in the fraction of retired persons significantly decreases risk premiums. This demographic predictability of premiums is strongest in countries with well-developed social security systems and lesser-developed financial markets.

Suggested Citation

  • Andrew Ang & Angela Maddaloni, 2005. "Do Demographic Changes Affect Risk Premiums? Evidence from International Data," The Journal of Business, University of Chicago Press, vol. 78(1), pages 341-380, January.
    • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:341-380
    DOI: 10.1086/426528
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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