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This article tests how demographic changes affect capital markets. The life-cycle investment hypothesis states that at an early stage an investor allocates more wealth in housing and then switches to financial assets at a later stage. Consequently, the stock market should rise but the housing market should decline with the average age, a prediction supported in the post-1945 period. The second hypothesis that an investor's risk aversion increases with age is tested by estimating the resulting Euler equation and supported in the post-1945 period. A rise in average age is found to predict a rise in risk premiums. Copyright 1994 by University of Chicago Press.
Bakshi et al. (Sat,) studied this question.