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Identifying horizon-based heterogeneity in the cross section of portfolio returns

Clark Lundberg ()
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Clark Lundberg: San Diego State University

Economics Bulletin, 2019, vol. 39, issue 2, 1163-1175

Abstract: I introduce an econometric framework to identify and estimate horizon-based heterogeneity in panel data. Using this approach, I identify the horizon-based structure in the cross section of portfolio returns. Accounting for this structure results in a significant improvement in pricing accuracy relative to the standard CAPM and Fama-French three-factor models. The majority of the improvement arises from separately pricing long-horizon and shorter-horizon market exposure.

Keywords: time horizons; asset pricing; wavelets (search for similar items in EconPapers)
JEL-codes: G1 C2 (search for similar items in EconPapers)
Date: 2019-05-15
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