Short- and Long-Horizon Behavioral Factors
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.
-
-
Copy CitationKent Daniel, David Hirshleifer, and Lin Sun, "Short- and Long-Horizon Behavioral Factors," NBER Working Paper 24163 (2017), https://doi.org/10.3386/w24163.
-
Non-Technical Summaries
- Author(s): David HirshleiferFinancial analysts and stock market investors alike are subject to behavioral biases. Objective analyst forecasts can potentially help...
Published Versions
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. citation courtesy of 
Related
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
