Arnott: Mind The (Expectations) Gap

July 03, 2013


NOTE: The title is borrowed from Russel Kinnel's wonderful Morningstar research, repurposed to our demography topic.


  1. See past issues of Fundamentals for more on the 3-D Hurricane.
  2. This choice of four phases might not come from traditional demographic theory, but it serves our purposes of illustrating the transitions most countries are recently experiencing.
  3. Hobbes, Thomas. 1651. Leviathan, or the Matter, Form, and Power of a Commonwealth, Ecclesiastical and Civil. London: Andrew Crooke.
  4. According to Bacaër (2011), before the 18th century it was common to publish bulletins with baptisms and burials that contained the cause of death—mainly to inform citizens about plague epidemics—but not the age of death. For this reason, most tables produced involved a significant amount of guesswork to estimate the age of death from the cause of death.
  5. Halley himself won the actuarial lottery of the 17th century, reaching age 85. His own tables gave him a 1.4% chance of living so long.


Arnott, Robert D., and Denis B. Chaves. 2012. "Demographic Changes, Financial Markets, and the Economy." Financial Analysts Journal, vol. 68, no. 1 (January/February):23–46.

———. 2013. "A New 'New Normal' in Demography and Economic Growth." Journal of Indexes (forthcoming).

Bacaër, Nicolas. 2011. A Short History of Mathematical Population Dynamics. London: Springer Verlag.

Malmendier, Ulrike, and Stefan Nagel. 2011. "Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?" Quarterly Journal of Economics, vol. 126, no. 1 (February):373–416.

©2013 Research Affiliates, LLC. The material contained in this document is for general information purposes only. This material is not intended as an offer or a solicitation for the purchase and/or sale of any security or financial instrument, nor is it advice or a recommendation to enter into any transaction. Nothing contained in this material is intended to constitute legal, tax, securities, financial or investment advice, nor an opinion regarding the appropriateness of any investment. Research Affiliates, LLC, is an investment adviser registered under the Investment Advisers Act of 1940 with the U.S. Securities and Exchange Commission (SEC).

ROBERT ARNOTT, Chairman & CEO, Research Affiliates, LLC
DENIS CHAVES, Ph.D., Vice President, Research, Research Affiliates, LLC



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