We propose a Bayesian factor analysis model to rank the health of localities. Mortality and morbidity variables empirically contribute to the resulting rank, and population and spatial correlation are incorporated into a measure of uncertainty. We use county-level data from Texas and Wisconsin...

This paper formulates and estimates multistage production functions for children's cognitive and noncognitive skills. Skills are determined by parental environments and investments at different stages of childhood. We estimate the elasticity of substitution between investments in one period and...

In this paper we study the process of children's skill formation. The identification of this process is challenging because children's skills are observed only through arbitrarily scaled and imperfect measures. Using a dynamic la- tent factor structure, we provide new identification results...

A recent and growing area of research applies latent factor models to study the development of children's skills. Some normalization is required in these models because the latent variables have no natural units and no known location or scale. We show that the standard practice of...

We extend the control function approach of Altonji and Mansfield (2018) to allow for multiple group levels and complementarities. Our analysis provides a foundation for causal interpretation of multilevel mixed effects models in the presence of sorting. In our empirical application, we obtain...

Factors estimated from large macroeconomic panels are being used in an increasing number of applications. However, little is known about how the size and the composition of the data affect the factor estimates. In this paper, we question whether it is possible to use more series to extract the...

When excess returns are used to estimate linear stochastic discount factor (SDF) models, researchers often adopt a normalization of the SDF that sets its mean to 1, or one that sets its intercept to 1. These normalizations are often treated as equivalent, but they are subtly different both in...

Motivated from investment-based asset pricing, we propose a new factor model consisting of the market factor, a size factor, an investment factor, and a return on equity factor. The new factor model outperforms the Carhart four-factor model in pricing portfolios formed on earnings surprise,...

We construct factors from a cross section of exchange rates and use the idiosyncratic deviations from the factors to forecast. In a stylized data generating process, we show that such forecasts can be effective even if there is essentially no serial correlation in the univariate exchange rate...

This paper uses the factor augmented regression framework to analyze the relation between bond excess returns and the macro economy. Using a panel of 131 monthly macroeconomic time series for the sample 1964:1-2007:12, we estimate 8 static factors by the method of asymptotic principal...