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
Instrumented Principal Component Analysis (WP) w/ Kelly and Su
Factor estimation using instrumental data to capture both cross-sectional and time-series variation in factor loadings [SSRN]
Macroeconomic News in the Cross Section of Asset Growth (WP) w/ Hou, Hugon, and Lyle
Firms' investment decisions contain new information about future aggregate productivity shocks. [SSRN]
The Pseudo-Information Filter (WP)
The pseudo-information filter offers significant computational advantages over the Kalman filter when the data are high-dimensional. [draft]
Markup Variation and Endogenous Fluctuations in the Price of Investment Goods (WP) w/ Floetotto and Jaimovich
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]
