Jinyong Hahn, Niu He, Zhipeng Liao, Wenyu Zhou
arXiv 12 Jun 2026 · Econometrics
arXiv:2606.14057 · PDF · DOI · OpenAlex · Extracted main text
We develop an estimation and inference framework for granular instrumental variables (GIVs) in models with latent aggregate shocks. Our key insight is that valid GIVs are characterized by the orthogonal complement of the factor-loading space. This characterization yields a feasible procedure for constructing GIVs when factor loadings are unknown and does not require a large cross-sectional dimension. We provide practical procedures for inference and specification testing, and apply the framework to estimate the aggregate equity market multiplier. Our empirical results reveal substantial heterogeneity in equity demand elasticities across investor sectors and may provide nuanced support for the inelastic-markets hypothesis.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Gabaix and Koijen (2024) Granular instrumental variables | 1.000 | 26 | 5 | 100% |
| 2 | Gabaix and Koijen (2023) In search of the origins of financial fluctuations: The inelastic markets hypothesis | 1.000 | 14 | 4 | 100% |
| 3 | Bai (2003) Inferential theory for factor models of large dimensions | 0.644 | 2 | 2 | 100% |
| 4 | Banafti and Lee (2022) Inferential theory for granular instrumental variables in high dimensions | 0.644 | 2 | 2 | 100% |
| 5 | Camanho, Hau, and Rey (2022) Global portfolio rebalancing and exchange rates | 0.644 | 2 | 2 | 100% |
| 6 | Gabaix (2011) The granular origins of aggregate fluctuations | 0.644 | 2 | 2 | 100% |
| 7 | Newey and Windmeijer (2009) Generalized method of moments with many weak moment conditions | 0.644 | 2 | 2 | 100% |
| 8 | Koijen and Yogo (2019) A demand system approach to asset pricing | 0.511 | 2 | 1 | 100% |
| 9 | Hansen, Heaton, and Yaron (1996) Finite-sample properties of some alternative GMM estimators | 0.405 | 1 | 1 | 100% |
| 10 | Acemoglu, Carvalho, Ozdaglar, and Tahbaz-Salehi (2012) The network origins of aggregate fluctuations | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 33 scored citations.