Conditional Dynamics and the Multihorizon Risk-Return Trade-Off

• 成果类型: Article
• 署名作者: Chernov, Mikhail; Lochstoer, Lars A.; Lundeby, Stig R. H.
• 署名单位: National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); Norwegian School of Economics (NHH)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab053
• 发表日期: 2022
• 页码: 1310
• 关键词: cross-section; Consumption risk; dividend yields; term structure; STOCK; MODEL; INFORMATION; variables; anomalies; premia

摘要

We propose testing asset pricing models using multihorizon returns (MHRs). MHRs effectively generate a new set of test assets that is endogenous to the model and that identifies a broad set of possible conditional misspecifications. We apply MHR-based testing to prominent linear factor models and show that these models typically do a poor job of pricing longer-horizon returns, with pricing errors that are similar in magnitude to the risk premiums they were designed to explain. We trace the errors to the conditional factor dynamics. Explicitly incorporating factor timing into the models often makes mispricing worse, thereby posing a challenge for future research.