The investment horizon and asset pricing models

Kathleen Walsh

doi:10.1177/0312896214521439

The investment horizon and asset pricing models

Kathleen Walsh^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

The Life Cycle Hypothesis suggests that the primary motivation for saving is to accumulate resources in order to fund retirement. This suggests that investors have heterogeneous investment horizons, yet many tests of the CAPM assume homogeneous horizons. This paper estimates a time varying heterogeneous investment horizon using over 200 years of demographic data. We test the CAPM and its assumption that the Equity Risk Premium is positive using our estimated investment horizon. We conclude that the CAPM is not violated when tested over a horizon that more accurately reflects investor behavior.

Original language	English
Pages (from-to)	277-294
Number of pages	18
Journal	Australian Journal of Management
Volume	40
Issue number	2
DOIs	https://doi.org/10.1177/0312896214521439
Publication status	Published - 4 May 2015

Access to Document

10.1177/0312896214521439

Cite this

@article{26eb8f1c32ea4be49c9aeaf3b80592b9,

title = "The investment horizon and asset pricing models",

abstract = "The Life Cycle Hypothesis suggests that the primary motivation for saving is to accumulate resources in order to fund retirement. This suggests that investors have heterogeneous investment horizons, yet many tests of the CAPM assume homogeneous horizons. This paper estimates a time varying heterogeneous investment horizon using over 200 years of demographic data. We test the CAPM and its assumption that the Equity Risk Premium is positive using our estimated investment horizon. We conclude that the CAPM is not violated when tested over a horizon that more accurately reflects investor behavior.",

keywords = "CAPM, Equity Risk Premium, G12, investment horizon: demographic data",

author = "Kathleen Walsh",

note = "Publisher Copyright: {\textcopyright} The Author(s) 2014",

year = "2015",

month = may,

day = "4",

doi = "10.1177/0312896214521439",

language = "English",

volume = "40",

pages = "277--294",

journal = "Australian Journal of Management",

issn = "0312-8962",

publisher = "SAGE Publications",

number = "2",

}

TY - JOUR

T1 - The investment horizon and asset pricing models

AU - Walsh, Kathleen

N1 - Publisher Copyright: © The Author(s) 2014

PY - 2015/5/4

Y1 - 2015/5/4

N2 - The Life Cycle Hypothesis suggests that the primary motivation for saving is to accumulate resources in order to fund retirement. This suggests that investors have heterogeneous investment horizons, yet many tests of the CAPM assume homogeneous horizons. This paper estimates a time varying heterogeneous investment horizon using over 200 years of demographic data. We test the CAPM and its assumption that the Equity Risk Premium is positive using our estimated investment horizon. We conclude that the CAPM is not violated when tested over a horizon that more accurately reflects investor behavior.

AB - The Life Cycle Hypothesis suggests that the primary motivation for saving is to accumulate resources in order to fund retirement. This suggests that investors have heterogeneous investment horizons, yet many tests of the CAPM assume homogeneous horizons. This paper estimates a time varying heterogeneous investment horizon using over 200 years of demographic data. We test the CAPM and its assumption that the Equity Risk Premium is positive using our estimated investment horizon. We conclude that the CAPM is not violated when tested over a horizon that more accurately reflects investor behavior.

KW - CAPM

KW - Equity Risk Premium

KW - G12

KW - investment horizon: demographic data

UR - http://www.scopus.com/inward/record.url?scp=84930406657&partnerID=8YFLogxK

U2 - 10.1177/0312896214521439

DO - 10.1177/0312896214521439

M3 - Article

SN - 0312-8962

VL - 40

SP - 277

EP - 294

JO - Australian Journal of Management

JF - Australian Journal of Management

IS - 2

ER -

The investment horizon and asset pricing models

Abstract

Access to Document

Other files and links

Fingerprint

Cite this