Stock characteristics are connected to expected returns because they tell us about risk exposures; and only a few characteristics are really necessary for that.
Category: working paper
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]
The pseudo-information filter offers significant computational advantages over the Kalman filter when the data are high-dimensional. [draft]
The price of investment goods relative to consumptions goods is driven by both exogenous technology shocks and endogenous markup fluctuations due to changes in the relative competitive environment. [draft]