Whence LASSO? A Rational Interpretation

References

• Chen H, Dou WW, Kogan L (2024) Measuring “dark matter” in asset pricing models. J. Finance 79(2):843–902.Crossref, Google Scholar
• Cheng X, Dou WW, Liao Z (2022) Macro-finance decoupling: Robust evaluations of macro asset pricing models. Econometrica 90(2):685–713.Crossref, Google Scholar
• Chinco A, Clark-Joseph AD, Ye M (2019) Sparse signals in the cross-section of returns. J. Finance 74(1):449–492.Crossref, Google Scholar
• Condie S, Ganguli JV (2011) Ambiguity and rational expectations equilibria. Rev. Econom. Stud. 78(3):821–845.Crossref, Google Scholar
• Cong LW, Feng G, He J, He X (2025a) Growing the efficient frontier on panel trees. J. Financial Econom. 167:104024.Crossref, Google Scholar
• Cong LW, Liang T, Zhang X, Zhu W (2025b) Textual factors: A scalable, interpretable, and data-driven approach to analyzing unstructured information. Management Sci., ePub ahead of print October 14, https://doi.org/10.1287/mnsc.2020.01180.Google Scholar
• Cong LW, Tang K, Wang J, Zhang Y (2020) Alphaportfolio: Direct construction through deep reinforcement learning and interpretable AI. Preprint, submitted April 20, https://doi.org/10.2139/ssrn.3554486.Google Scholar
• Da R, Nagel S, Xiu D (2022) The statistical limit of arbitrage. NBER Working Paper No. 33070, National Bureau of Economic Research, Cambridge, MA.Google Scholar
• Dong X, Li Y, Rapach DE, Zhou G (2022) Anomalies and the expected market return. J. Finance 77(1):639–681.Crossref, Google Scholar
• Dou WW, Goldstein I, Ji Y (2023) AI-powered trading, algorithmic collusion, and price efficiency. Preprint, submitted May 23, https://doi.org/10.2139/ssrn.4452704.Google Scholar
• Easley D, O’Hara M (2009) Ambiguity and nonparticipation: The role of regulation. Rev. Financial Stud. 22:1817–1843.Crossref, Google Scholar
• Easley D, O’Hara M, Yang L (2014) Opaque trading, disclosure, and asset prices: Implications for hedge fund regulation. Rev. Financial Stud. 27(4):1190–1237.Crossref, Google Scholar
• Epstein LG, Schneider M (2008) Ambiguity, information quality, and asset pricing. J. Finance 63(1):197–228.Crossref, Google Scholar
• Epstein LG, Schneider M (2010) Ambiguity and asset markets. Ann. Rev. Financial Econom. 2(1):315–346.Crossref, Google Scholar
• Farboodi M, Veldkamp L (2020) Long-run growth of financial data technology. Amer. Econom. Rev. 110(8):2485–2523.Crossref, Google Scholar
• Foster FD, Viswanathan S (1996) Strategic trading when agents forecast the forecasts of others. J. Finance 51(4):1437–1478.Crossref, Google Scholar
• Freyberger J, Neuhierl A, Weber M (2020) Dissecting characteristics nonparametrically. Rev. Financial Stud. 33(5):2326–2377.Crossref, Google Scholar
• Ganguli JV, Yang L (2009) Complementarities, multiplicity, and supply information. J. Eur. Econom. Assoc. 7(1):90–115.Crossref, Google Scholar
• Garlappi L, Giammarino R, Lazrak A (2017) Ambiguity and the corporation: Group disagreement and underinvestment. J. Financial Econom. 125(3):417–433.Crossref, Google Scholar
• Garlappi L, Uppal R, Wang T (2007) Portfolio selection with parameter and model uncertainty: A multi-prior approach. Rev. Financial Stud. 20(1):41–81.Crossref, Google Scholar
• Gilboa I, Schmeidler D (1989) Maxmin expected utility with non-unique prior. J. Math. Econom. 18(2):141–153.Google Scholar
• Goldstein I, Yang L (2019) Good disclosure, bad disclosure. J. Financial Econom. 131(1):118–138.Crossref, Google Scholar
• Goldstein I, Ozdenoren E, Yuan K (2013) Trading frenzies and their impact on real investment. J. Financial Econom. 109(2):566–582.Crossref, Google Scholar
• Goto S, Xu Y (2015) Improving mean variance optimization through sparse hedging restrictions. J. Financial Quant. Anal. 50(6):1415–1441.Crossref, Google Scholar
• Gu S, Kelly B, Xiu D (2020) Empirical asset pricing via machine learning. Rev. Financial Stud. 33(5):2223–2273.Crossref, Google Scholar
• Guo L, Sang B, Tu J, Wang Y (2024) Cross-cryptocurrency return predictability. J. Econom. Dynamic Control 163:104863.Crossref, Google Scholar
• Hansen LP, Sargent TJ (2008) Robustness (Princeton University Press, Princeton, NJ).Crossref, Google Scholar
• Holden CW, Subrahmanyam A (1992) Long-lived private information and imperfect competition. J. Finance 47(1):247–270.Crossref, Google Scholar
• Kelly B, Xiu D (2023) Financial machine learning. Foundations Trends Finance 13(3–4):205–363.Crossref, Google Scholar
• Kelly B, Malamud S, Pedersen LH (2023) Principal portfolios. J. Finance 78(1):347–387.Crossref, Google Scholar
• Kozak S, Nagel S, Santosh S (2020) Shrinking the cross-section. J. Financial Econom. 135(2):271–292.Crossref, Google Scholar
• Kyle AS (1985) Continuous auctions and insider trading. Econometrica 53(6):1315–1335.Crossref, Google Scholar
• Kyle AS, Xiong W (2001) Contagion as a wealth effect. J. Finance 56(4):1401–1440.Crossref, Google Scholar
• Mele A, Sangiorgi F (2015) Uncertainty, information acquisition, and price swings in asset markets. Rev. Econom. Stud. 82(4):1533–1567.Crossref, Google Scholar
• Nagel S (2021) Machine Learning in Asset Pricing, vol. 8 (Princeton University Press, Princeton, NJ).Google Scholar
• Rapach DE, Zhou G (2020) Time-series and cross-sectional stock return forecasting: New machine learning methods. Jurczenko E, eds. Machine Learning for Asset Management: New Developments and Financial Applications (John Wiley & Sons, Inc., Hoboken, NJ), 1–33.Google Scholar
• Rapach DE, Strauss JK, Zhou G (2013) International stock return predictability: What is the role of the United States? J. Finance 68(4):1633–1662.Crossref, Google Scholar
• Rapach DE, Strauss JK, Tu J, Zhou G (2019) Industry return predictability: A machine learning approach. J. Financial Data Sci. 3:9–28.Crossref, Google Scholar
• Tibshirani R (1996) Regression shrinkage and selection via the lasso. J. Roy. Statist. Soc. Ser. B (Methodological) 58(1):267–288.Crossref, Google Scholar
• Tibshirani R (2011) Regression shrinkage and selection via the lasso: A retrospective. J. Roy. Statist. Soc. Ser. B (Statist. Methodology) 73(3):273–282.Crossref, Google Scholar
• Uppal R, Wang T (2003) Model misspecification and underdiversification. J. Finance 58(6):2465–2486.Crossref, Google Scholar
• Yang L, Zhu H (2020) Back-running: Seeking and hiding fundamental information in order flows. Rev. Financial Stud. 33(4):1484–1533.Crossref, Google Scholar