Will an aging population lower stock returns?

The study, by James M. Poterba, an economics professor at the
Massachusetts Institute of Technology, has found that changes in the
proportion of retirees in the population have only a modest impact on
stock market returns. So while the market is likely to come under some
downward pressure from the retirement of boomers over the next couple
of decades, he says he believes that there is no reason to expect the
effects to be severe.

Professor Poterba’s study, "The Impact
of Population Aging on the Financial Markets," has been circulating
since last autumn as an academic working paper. A copy is at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=609226.

He compared the market’s year-to-year returns from 1926 to 2003 with
the annual changes in a number of demographic indicators, including the
proportion of the population in retirement – a phase of life when
investors are presumably net sellers of stock. He also looked at the
share of the population in the 40-to-64 age group – people who tend to
be net buyers of stocks. Regardless of the statistical test used,
however, he found little evidence to support a forecast of a long-term
bear market over the next couple of decades.

That is Mark Hulbert, here is The New York Times link.  Surely it is odd that macroeconomics (or finance, for that matter) has so little to say about the determinants of the absolute level of stock prices, no?

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