Paper Summary:

This paper focuses on the effects of an aging population on financial asset (stocks and bonds) returns in the U.S. for the post-World War II period. The first part of the paper provides a brief review of demographic changes that will confront a selected country during the next half century. The next part presents a review of the empirical literature on demographics and financial asset demands. Next, the paper develops a conceptual framework for analyzing how an aging population triggered by falling birth rates and rising life expectancies affects the demand for financial assets. A discussion of the ideal data set and an outline of the challenges that arise in estimating how population aging will alter aggregate demand follows. Next, the paper builds up the actual models used in this paper and discusses actual data and proxies. Finally, the paper presents new findings and tests empirically the relation between aging and asset returns in the U.S. The conclusion summarizes the main findings and notes areas for future study.

Outline
The Demographic Transition in the U.S. and Other Nations
Theoretical Background and Literature Review
Conceptual Model
Ideal Data
Actual Model
Results and Analysis

From the Paper:

"Sell, Sell to whom? This dilemma might haunt the Baby Boomers in the next century as they attempt to unload their assets to pay for retirement. The rising number of middle-aged workers today is the direct result of the Baby Boom generation, those born in roughly the two decades following World War II. It is this high working population ratio, which has often been identified as an important factor for rises in productivity (see Shimer (1998)). As these boomers age, they will have profound social and economic implications for much of the developed world. The large increase in the ratio of retired workers to those in the labor force during the next three decades will place substantial strains on public pension programs. Just in the U.S. anticipated social security expenditures will outstrip income by 2020. In many other developed nations the fiscal prospect is even more daunting than it is in the United States."

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