We improve on the Instrumented Principal Component Analysis (IPCA) model developed in Kelly, Pruitt and Su (2019) by providing more efficient Generalized Least Square (GLS) estimators with a closed-form limiting distribution allowing for a more consistent (mis)pricing inference. The IPCA model...

Kozak and Nagel (2022) theoretically show how GLS factors, slopes of monthly cross-sectional GLS regressions of returns on characteristics, perfectly span the mean-variance frontier. We provide an empirical design to recover feasible GLS factors clustering the covariance of returns at the...

Studies on commonality in returns, order flows and liquidity find that the first principal component is closely aligned with the market factor. With the increasing presence of high-frequency trading, commonality in returns, order flows, and liquidity can potentially arise from the commonality in...

Biclustering of observations and the variables is of interest in many scientific disciplines. In a single set of data matrix it is handled through the singular value decomposition. Here we deal with two sets of variables: response and predictor sets. We model the joint relationship via...

This paper develops a common-factor model to investigate relationships between security returns/return volatility and trading volume. The model generalizes Tauchen and Pitts' (1983) MDH model by capturing possible interactions among securities. In our model, both price changes and trading volume...