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Cited by 506

The DOI matches its Crossref record; 65 of the 65 references it cites were found in a registry or an index.

Why Is Long‐Horizon Equity Less Risky? A Duration‐Based Explanation of the Value Premium

Open access
LETTAU, MARTIN, WACHTER, JESSICA A.·2007·The Journal of Finance
DOI 10.1111/j.1540-6261.2007.01201.x
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Abstract

We propose a dynamic risk‐based model that captures the value premium. Firms are modeled as long‐lived assets distinguished by the timing of cash flows. The stochastic discount factor is specified so that shocks to aggregate dividends are priced, but shocks to the discount rate are not. The model implies that growth firms covary more with the discount rate than do value firms, which covary more with cash flows. When calibrated to explain aggregate stock market behavior, the model accounts for the observed value premium, the high Sharpe ratios on value firms, and the poor performance of the CAPM.

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Crossref · 10.1111/j.1540-6261.2007.01201.x

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Metadata

Authors
LETTAU, M., & WACHTER, J. A.
Venue
The Journal of Finance
Publisher
Wiley
Published
2007-01-11
Volume
62
Issue
1
Pages
55-92
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/j.1540-6261.2007.01201.x
OpenAlex
W3121456775
Cited by
506
References
65
FWCI
44.28
Type
journal article
Language
en
Open access
bronze

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CoChat. (2026). Citation check: Why Is Long‐Horizon Equity Less Risky? A Duration‐Based Explanation of the Value Premium. https://app.cochat.ai/papers/10.1111/j.1540-6261.2007.01201.x
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LETTAU, M., & WACHTER, J. A. (2007). Why Is Long‐Horizon Equity Less Risky? A Duration‐Based Explanation of the Value Premium. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2007.01201.x

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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.

Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.