Short- and Long-Horizon Behavioral Factors / Kent Daniel, David Hirshleifer, Lin Sun.

Format:

Book

Author/Creator:

Daniel, Kent.

Contributor:

National Bureau of Economic Research.

Hirshleifer, David.

Sun, Lin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24163.

NBER working paper series no. w24163

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

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.

Notes:

Print version record

December 2017.