1. Introduction There are many reasons why two houses might have different prices. To start with, one house might just be larger or have a better layout than the other. Let's call these sorts of house-to-house differences "fine-grained". But, … [Continue reading]

# Using the LASSO to Forecast Returns

1. Motivating Example A Popular Goal. Financial economists have been looking for variables that predict stock returns for as long as there have been financial economists. For some recent examples, think about Jegadeesh and Titman (1993), which … [Continue reading]

# Notes on Kyle (1989)

1. Motivating Example In several earlier posts (e.g., here and here) I've talked about the two well-known information-based asset-pricing models, Grossman and Stiglitz (1980) and Kyle (1985). But, there are lots of situations that don't really … [Continue reading]

# Screening Using False-Discovery Rates

1. Motivating Example Jegadeesh and Titman (1993) show that, if you rank stocks according to their returns over the previous $12$ months, then the past winners will outperform the past losers by $1.5{\scriptstyle \%}$ per month over the next $3$ … [Continue reading]

# Persistence and Dispersion in the Housing Market

1. Motivation House-price growth is persistent. When you regress current house-price growth on lagged house-price growth using monthly Zip-code level data, \begin{align} \Delta \bar{p}_{z,t} &= \alpha_z + \beta_z \cdot \Delta \bar{p}_{z,t-1} + … [Continue reading]