Using a novel measure of industry exposure to government spending, we document predictable variation in cash flows and stock returns over political cycles. During Democratic presidencies, firms with high government exposure experience higher cash flows and stock returns, while the opposite...

This paper explores the impact of product market competition on the positive relation between labor mobility (LM) and future stock returns. We develop a production-based model, which predicts a stronger positive relation between LM and expected returns for firms in highly competitive industries....

We propose a measure of corporate investment plans, namely, the expected investment growth (EIG). We document a robust finding that firms with high EIG have larger future investment growth and earn significantly higher returns than firms with low EIG, which cannot be fully explained by leading...

The Asset pricing literature has produced hundreds of risk factor candidates aimed at explaining the cross-section of expected excess returns, although risk factors which are in fact capable of providing independent information remains an open question. Appling a sparse model, Kozak, Nagel, and...

Prior research finds expected returns decrease in firm-level total asset growth. This study shows that external growth, measured as asset growth raised from capital markets, has stronger power than total asset growth predicting the cross section of average returns. External growth subsumes the...

We propose a new approach for estimating expected returns on individual stocks from a large number of firm characteristics. We treat expected returns as latent variables and apply the partial least squares (PLS) estimator that filters them out from the characteristics under an assumption that...

We examine whether cross-firm return predictability is associated with accounting quality (AQ), and find that stock returns of good AQ firms significantly positively predict one-month-ahead stock returns to industry- and size- matched poor AQ firms. In testing a delayed-information-processing...

I study how and why the two major types of business investment, equipment investment and structures investment, are differently linked to stock returns. I empirically show that equipment investment has a significantly stronger predictive power for stock market returns than structures investment,...

An increase in the number of asset pricing models intensifies model uncertainties in assetpricing. While a pure "model selection" (singling out a best model) can result in a loss of usefulinformation, a full “model pooling” may increase the risk of including noisy information.We make a...