Do Demographic Changes Affect Risk Premiums? Evidence from International Data

59 Pages Posted: 4 Feb 2003

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Angela Maddaloni

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2003


We examine the link between equity risk premiums and demographic changes using a very long sample over the whole twentieth century for the US, Japan, UK, Germany and France, and a shorter sample covering the last third of the twentieth century for fifteen countries. We find that demographic variables significantly predict excess returns internationally. However, the demographic predictability found in the US by past studies for the average age of the population does not extend to other countries. Pooling international data, we find that, on average, faster growth in the fraction of retired persons significantly decreases risk premiums. This demographic predictability of risk premiums is stronger for countries with well-developed social security systems and lesser-developed financial markets.

Keywords: Population aging, demography, risk premiums, international predictability, social security

JEL Classification: G12, G15, J10, P46

Suggested Citation

Ang, Andrew and Maddaloni, Angela, Do Demographic Changes Affect Risk Premiums? Evidence from International Data (January 2003). Available at SSRN: or

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Angela Maddaloni

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

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