Short- and Long-Horizon Behavioral Factors

Kent Daniel, David Hirshleifer and Lin Sun

No 24163, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a theoretically-motivated factor model based on investor psychology and assess its ability to explain the cross-section of U.S. equity returns. Our factor model augments the market factor with two factors which capture long- and short-horizon mispricing. The long-horizon factor exploits the information in managers' decisions to issue or repurchase equity in response to persistent mispricing. The short-horizon earnings surprise factor, which is motivated by investor inattention and evidence of short-horizon underreaction, captures short-horizon anomalies. This three-factor risk-and-behavioral model outperforms other proposed models in explaining a broad range of return anomalies.

JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2017-12
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Kent Daniel & David Hirshleifer & Lin Sun & Lauren Cohen, 2020. "Short- and Long-Horizon Behavioral Factors," The Review of Financial Studies, vol 33(4), pages 1673-1736.

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Journal Article: Short- and Long-Horizon Behavioral Factors (2020)
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