Abstract
We study whether the pricing of systematic factors depends on the investment horizon over which risk is measured. The Fama-French value beta is priced when risk is measured over intermediate horizons, while liquidity beta is priced over short horizons; size and momentum betas are not priced as risk factors. Long-horizon institutional investors overweight assets with high intermediate-horizon exposures to value beta and high short-horizon exposures to liquidity beta. The results suggest that what looks like a beta premium to investors with a short or intermediate investment horizon may look like alpha to investors with long investment horizons.
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