Population Aging and the Expected Return on Financial Assets
James M. Poterba, MIT

The paper, “Population Age Structure and Asset Returns: An Empirical Investigation,” examines the association between population age structure and the returns on stocks and bonds. The paper is motivated by the claim that the aging of the “Baby Boom” cohort in the United States is a key factor in explaining the recent rise in asset values. The paper summarizes household age-asset accumulation profiles using data from the Survey of Consumer Finances. The results show that although asset accumulation peaks near age 60, wealthy households with substantial asset holdings appear to decumulate slowly, if at all, after retirement. The historical relationship between demographic structure and real returns on Treasury bills, long-term government bonds, and corporate stock does not suggest any robust relationship between demographic structure and asset returns. (Accepted Fall 1998.)