Title

Demography and the Long-run Predictability of the Stock Market

Document Type

Discussion Paper

Publication Date

8-1-2002

CFDP Number

1380

CFDP Pages

23

Abstract

Stock market price/earnings ratios should be influenced by demography. Since demography is predictable, stock returns should be as well. We provide a simple stochastic OLG model with a cyclical structure that generates cyclical P/E ratios. We calibrate the model to roughly fit the cyclical features of historical P/E ratios.

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