Demographic structure and asset returns

TLDR: This article investigated the association between population age structure, particularly the share of the population in the prime saving years (40 to 64), and the returns on stocks and bonds, and found that the aging of the "baby boom" cohort is a key factor in explaining the recent rise in asset values, and by predictions that asset prices will decline when this group reaches retirement age and begins to reduce its asset holdings.

Abstract: This paper investigates the association between population age structure, particularly the share of the population in the ‘prime saving years’ (40 to 64), and the returns on stocks and bonds. The paper is motivated by recent claims that the aging of the ‘baby boom’ cohort is a key factor in explaining the recent rise in asset values, and by predictions that asset prices will decline when this group reaches retirement age and begins to reduce its asset holdings. This paper begins by considering household age-asset accumulation profiles. Data from repeated cross sections of the Survey of Consumer Finances suggest that, whereas age-wealth profiles rise sharply when households are in their thirties and forties, they decline much more gradually when households are in their retirement years. When these data are used to generate ‘projected asset demands’ based on the projected future age structure of the U.S. population, they do not show a sharp decline in asset demand between 2020 and 2050. The paper considers ...