An Aging Population Increase and the Stock Market

Abstract

Purpose: The purpose of this study is to investigate the impact of changes in the demographic structure resulting from an aging population increase on the stock market and examine its implications. Research Design: To this end, the research was conducted based on the theory of portfolio composition according to the life cycle. In addition, the STATA program was used for analysis. Data and Methodology: For this study, demographic data and stock market data of Republic of Korea and G7 countries were used. The data necessary for this study were collected through the OECD, the Bank of Korea, and the World Bank. In addition, the Panel regression model was used as a research model for data analysis. Results: As a result of analysis, it was found that the aging index had a negative effect on the stock market. In other words, the aging population is likely to dispose of risky assets first in order to maintain a certain level of consumption tendency as income decreases. On the other hand, as an effect of prolonging life expectancy, the increase/decrease rate of the population over 65 years old and the alternating effect of the remaining life expectancy were found to have the opposite sign of the aging index. This is a part that is expected to offset the risk of falling prices by delaying the disposal of dangerous assets and extending the holding period due to the extended life expectancy. Conclusions: These analysis results suggest that the likelihood of withdrawal of risky assets may increase as aging progresses, but it may be limited in acting as a factor of a sharp decline in the stock index. However, such an increase in the aging population is likely to continue, not just a temporary phenomenon. Therefore, it is judged to be sufficiently prepared for the aging of the population. This study is significant in examining the relationship between the increase of the aging population and the extension of life expectancy. However, it is expected that more in-depth and precise research will be possible in the future if sufficient data are accumulated and expanded to target the bond market and indirect investment market.