Horizon Pricing, Journal of Financial and Quantitative Analysis
The 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 risk factors across investment horizons. Value (liquidity) risk is priced over intermediate (short) horizons. Conditioning horizon-factor exposures on firm characteristics indicates that characteristics, with the exception of momentum, are not priced beyond their contribution to systematic risk. Significant risk premia are more pronounced for assets held by investors with long investment horizons, who seems to be the natural bearers of systematic risk. The results highlight the importance of investment horizon in determining risk premia.
Avraham Kamara, Robert Korajczyk, Xiaoxia Lou, Ronnie Sadka
Kamara, Avraham, Robert Korajczyk, Xiaoxia Lou, and Ronnie Sadka. 2016. Horizon Pricing. Journal of Financial and Quantitative Analysis. 51(6): 1769-1793.LINK