Demographics and industry returns

• 成果类型: Article
• 署名作者: DellaVigna, Stefano; Pollet, Joshua A.
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.97.5.1667
• 发表日期: 2007
• 页码: 1667-1702
• 关键词: STOCK RETURNS; baby boom; MARKET; RISK; regressions; prices; MODEL

摘要

How do investors respond to predictable shifts in profitability? We consider how demographic shifts affect profits and returns across industries. Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing homes. These demand changes are predictable once a specific cohort is born. We use lagged consumption and demographic data to forecast future consumption demand growth induced by changes in age structure. We find that demand forecasts predict profitability by industry. Moreover, forecast demand changes five to ten years in the future predict annual industry stock returns. One additional percentage point of annualized demand growth due to demographics predicts a 5 to 10 percentage point increase in annual abnormal industry stock returns. However, forecasted demand changes over shorter horizons do not predict stock returns. A trading strategy exploiting demographic information earns an annualized risk-adjusted return of approximately 6 percent. We present a model of inattention to information about the distant future that is consistent with the findings. We also discuss alternative explanations, including omitted risk-based factors.