Non-Myopic Betas

60 Pages Posted: 25 Nov 2015 Last revised: 29 Jun 2022

See all articles by Semyon Malamud

Semyon Malamud

Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Grigory Vilkov

Frankfurt School of Finance & Management

Date Written: March 27, 2017


We develop an overlapping generations model in which investors differ in their investment horizons. In equilibrium, the intertemporal hedging demand of longer horizon investors leads to a two-factor capital asset pricing model (CAPM) in which risk premiums are determined by both the market (myopic) beta and the “non-myopic beta” with respect to the future return on the mean-variance efficient portfolio. We use equilibrium equations to identify the efficient portfolio non-parametrically and show that non-myopic betas are indeed priced in the cross- section of stock returns, and the relationship between expected returns and non-myopic betas is monotone increasing and economically significant. In the presence of funding constraints, our model also predicts that low non-myopic beta stocks deliver higher risk-adjusted returns. We confirm this prediction by constructing a “betting against non-myopic beta” factor and showing that it generates superior performance over and above a number of factor models and is negatively correlated with the standard “betting against beta” portfolio.

Keywords: Asset prices, beta, CAPM, hedging, asset allocation, portfolio management, mutual funds

JEL Classification: G01, G11, G12, G14, G15

Suggested Citation

Malamud, Semyon and Vilkov, Grigory, Non-Myopic Betas (March 27, 2017). Journal of Financial Economics (JFE), Vol. 129, No. 2, 2018, Available at SSRN: or

Semyon Malamud

Ecole Polytechnique Federale de Lausanne ( email )

Lausanne, 1015

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Grigory Vilkov (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322


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