Abstract

http://ssrn.com/abstract=2114987
 
 

References (51)



 


 



Horizon Pricing


Avraham Kamara


University of Washington - Michael G. Foster School of Business

Robert A. Korajczyk


Northwestern University - Kellogg School of Management

Xiaoxia Lou


University of Delaware - Alfred Lerner College of Business and Economics

Ronnie Sadka


Boston College - Carroll School of Management

July 28, 2014


Abstract:     
An extensive literature documents heterogeneity in the delay of stock-price reaction to systematic shocks, implying that asset risk depends on investment horizon. We study the pricing of common risk factors across investment horizons. Value risk is priced over intermediate horizons, while liquidity poses a short-horizon risk. Conditioning horizon-factor exposures on firm characteristics indicates that characteristics, with the exception of momentum, are not priced beyond their contribution to systematic risk. The pricing of both intermediate-horizon value risk and short-horizon liquidity risk is more pronounced for assets held by investors with long investment horizons (over three years). Therefore, these investors appear to be the natural bearers of systematic risk. The results highlight the importance of investment horizon in determining risk premia.

Number of Pages in PDF File: 40

Keywords: asset pricing model, investment horizon, factors, characteristics

JEL Classification: G1, G12, G14

working papers series


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Date posted: July 22, 2012 ; Last revised: July 29, 2014

Suggested Citation

Kamara, Avraham and Korajczyk, Robert A. and Lou, Xiaoxia and Sadka, Ronnie, Horizon Pricing (July 28, 2014). Available at SSRN: http://ssrn.com/abstract=2114987 or http://dx.doi.org/10.2139/ssrn.2114987

Contact Information

Avraham Kamara
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
206-543-0652 (Phone)
206-221-6856 (Fax)
Robert A. Korajczyk (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8336 (Phone)
847-491-5719 (Fax)
Xiaoxia Lou
University of Delaware - Alfred Lerner College of Business and Economics ( email )
Newark, DE 19716
United States
Ronnie Sadka
Boston College - Carroll School of Management ( email )
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
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