Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237795 
Year of Publication: 
2021
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2021-062/III
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We find that the outperformance for Fama-French factors compared to macroeconomic factors in terms of fitting the cross-section of expected returns disappears when accounting for horizon effects. In addition, we obtain novel empirical relations between macroeconomic factors and Fama-French factors at longer horizons. To obtain our results, we introduce a general linear multifactor asset pricing methodology that integrates systematic risk measured at different frequencies into a single pricing equation. Our setup allows for a setting where investors with different investment horizons may experience different levels of systematic risk, which could arise from delayed stock price reaction to systematic factor news.
Subjects: 
Cross-Section of Stock Returns
Factors
Frequency Decomposition
Horizon Effects
Investment Horizon
JEL: 
G12
C58
G11
Document Type: 
Working Paper

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