Horizon Effects in Average Returns: The Role of Slow Information Diffusion

• 成果类型: Article
• 署名作者: Boguth, Oliver; Carlson, Murray; Fisher, Adlai; Simutin, Mikhail
• 署名单位: Arizona State University; Arizona State University-Tempe; University of British Columbia; University of Toronto
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw024
• 发表日期: 2016
• 页码: 2241
• 关键词: cross-section; MARKET-EFFICIENCY; STOCK; AUTOCORRELATIONS; biases; investors; momentum; prices; news; size

摘要

We characterize linkages between average returns calculated at different horizons. Theoretically, when stocks incorporate information slowly, average short-horizon returns are downward biased. Buy-and-hold strategies can amplify the effect. In contrast, existing theories analyze price noises that are independent of fundamentals, and buy-and-hold portfolio returns are unaffected. We document horizon effects as large as 10% annualized in daily and monthly style portfolios and international indices. Slow reaction to market information, identified by gradually declining lagged betas, is an important cause. These findings have natural consequences for performance evaluation.