An extensive literature documents heterogeneity in the delay of stock-price reaction to systematic shocks, implying that relevant asset risk depends on investment horizon. We study pricing of common risk factors across investment horizons. We find that liquidity risk is priced over short horizons and market risk is priced over intermediate horizons. Value/growth risk is priced over long horizons and as a non-risk-based characteristic at all horizons. Size and momentum are priced as characteristics rather than risk factors at all horizons. The results highlight the importance of investment horizon in determining risk premia.
Kamara, Avraham, Robert Korajczyk, Xiaoxia Lou and Ronnie Sadka. 2013. Horizon Pricing.