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The Cross-Section of Investment and Profitability: Implications for Asset Pricing
(with Mete Kilic and Louis Yang)
Journal of Financial Economics, 2022, 145(3), 706-724
Asset pricing predictions from the investment CAPM depend on the cross-sectional relation between investment and profitability. This research shows that both investment and profitability premiums are weak when stocks feature high cross-sectional investment-profitability correlation, explaining the insignificant historical investment and profitability premiums before Compustat.

Economic Stimulus at the Expense of Routine-Task Jobs
(with Selale Tuzel)
Journal of Finance, 2021, 76(6), 3347-3399
Slides | Appendix | Data | Media (Tommy Talks)
Do "job-creation" investment tax incentives improve job prospects for workers? This research explores states’ adoption of a major federal tax incentive for eligible firms but not for ineligible ones. Investment incentives increased firms' equipment investment and skilled employees but reduced routine-task employees with a delay of two years, resulting in an overall insignificant effect on the firms’ total employment. We estimate strong substitutability between computers and routine-task labor with an EOS = 3.3, and strong complementarity between computers and skilled labor with an EOS = 0.1.

Labor-Technology Substitution: Implications for Asset Pricing
Journal of Finance, 2019, 74(4), 1793-1839
Slides | Appendix | Data | Replication
*WFA Cubist Systematic Strategies PhD Candidate Award for Outstanding Research
This research shows that firms optimally replace routine-task workers with machines when their productivity is low. Hence, firms with routine-task labor maintain a replacement option that hedges their value against unfavorable macroeconomic shocks and lowers their expected returns. A new measure of firms' share of routine-task labor based on the BLS establishment-level occupational microdata confirms these predictions.

Trading Up and the Skill Premium
(with Nir Jaimovich, Sergio Rebelo, and Arlene Wong)
NBER Macroeconomics Annual, 2019, 34, 285-316
Slides | NBER Presentation | Comment - Daron Acemoglu | Comment - Jonathan Vogel | NBER Macro Annual Discussion
The increase in US income inequality is partly related to households increasing the quality of the goods and services consumed over time. Importantly, this research shows that the production of high-quality goods are more intensive in skilled labor than low-quality goods. Hence, "trade-up" increases the demand for skilled labor, contributing to a rise in the skill premium.

Local Risk, Local Factors, and Asset Prices
(with Selale Tuzel)
Journal of Finance, 2017, 72(1), 325-370
Slides | Appendix | Data
US cities have different exposures to aggregate shocks (local betas). This research shows that firms located in higher "local beta" MSAs face more procyclical factor prices, such as wages and real estate prices. The procyclical input factor prices reduce firms' systematic risks and lower their industry-adjusted returns and conditional betas. The effect is stronger among firms with low real estate holdings.

Suitability Check and Household Investments in Structured Products
(with Eric Chang and Dragon Tang)
Journal of Financial and Quantitative Analysis, 2015, 50(3), 597-622
Appendix
Using hand-collected survey data from Hong Kong, this research finds that retail investors purchase 8% more structured products when suitability is not checked when distributing banks sell the products. The effect is more pronounced for less financially literate investors. Moreover, investors tend to buy products with lower risk-adjusted returns when product suitability is not checked.