Stock characteristics are connected to expected returns because they tell us about risk exposure.
Factor estimation using instrumental data to capture both cross-sectional and time-series variation in factor loadings [SSRN]
Firms' investment decisions contain new information about future aggregate productivity shocks. [SSRN]
We evaluate a wide array of systemic risk indicators and their ability to forecast the quantiles of real activity, and propose methods for combining them that show there is a latent systemic risk factor that is robustly related to future macroeconomic downside risk. [publication] [SSRN]
The 3PRF is a simple least squares forecaster using many predictor variables that directly estimates the relevant forecast factors and is asymptotically normal for the best possible forecast. [publication] [SSRN]
Returns and cash flows are robustly predicted by valuation ratio cross sections, which expose growth and value assets' different exposures to economic shocks, with the implication that discount rates are less persistent than implied by leading asset pricing models. [publication] [SSRN]