Abstract
Empirical studies demonstrated that US baby boomers consumption and savings patterns have affected economic aggregates over the past decades, among them equity returns. Boomers’ retirement is expected to generate an excess supply of equities until 2050, but its impact varies with the specific population age structure along decades. This paper estimates aging effects on S&P500 returns between 1950-2050. Calibration for demographic and economic data between 1950-2005 yields model estimates that significantly explain the moving average of S&P500 returns. The present value of expected demographic effects until 2050 suggests that the S&P500 was rationally priced in early 2009, but its subsequent appreciation represents overpricing.
Published Version
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