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Wenyu Zhou

Publications and source records attributed to Wenyu Zhou.

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Granular Instrumental Variables: Estimation and Inference

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.

econ.EM

Shopping with a Platform AI Assistant: Who Adopts, When in the Journey, and What For

This paper provides some of the first large-scale descriptive evidence on how consumers adopt and use platform-embedded shopping AI in e-commerce. Using data on 31 million users of Ctrip, China's largest online travel platform, we study "Wendao," an LLM-based AI assistant integrated into the platform. We document three empirical regularities. First, adoption is highest among older consumers, female users, and highly engaged existing users, reversing the younger, male-dominated profile commonly documented for general-purpose AI tools. Second, AI chat appears in the same broad phase of the purchase journey as traditional search and well before order placement; among journeys containing both chat and search, the most common pattern is interleaving, with users moving back and forth between the two modalities. Third, consumers disproportionately use the assistant for exploratory, hard-to-keyword tasks: attraction queries account for 42% of observed chat requests, and chat intent varies systematically with both the timing of chat relative to search and the category of products later purchased within the same journey. These findings suggest that embedded shopping AI functions less as a substitute for conventional search than as a complementary interface for exploratory product discovery in e-commerce.

cs.AI

Hierarchical Testing of a Hybrid Machine Learning-Physics Global Atmosphere Model

Machine learning (ML)-based models have demonstrated high skill and computational efficiency, often outperforming conventional physics-based models in weather and subseasonal predictions. While prior studies have assessed their fidelity in capturing synoptic-scale atmospheric dynamics, their performance across timescales and under out-of-distribution forcing, such as +3K or +4K uniform-warming forcings, and the sources of biases remain elusive, to establish the model reliability for Earth science. Here, we design three sets of experiments targeting synoptic-scale phenomena, interannual variability, and out-of-distribution uniform-warming forcings. We evaluate the Neural General Circulation Model (NeuralGCM), a hybrid model integrating a dynamical core with ML-based component, against observations and physics-based Earth system models (ESMs). At the synoptic scale, NeuralGCM captures the evolution and propagation of extratropical cyclones with performance comparable to ESMs. At the interannual scale, when forced by El Niño-Southern Oscillation sea surface temperature (SST) anomalies, NeuralGCM successfully reproduces associated teleconnection patterns but exhibits deficiencies in capturing nonlinear response. Under out-of-distribution uniform-warming forcings, NeuralGCM simulates similar responses in global-average temperature and precipitation and reproduces large-scale tropospheric circulation features similar to those in ESMs. Notable weaknesses include overestimating the tracks and spatial extent of extratropical cyclones, biases in the teleconnected wave train triggered by tropical SST anomalies, and differences in upper-level warming and stratospheric circulation responses to SST warming compared to physics-based ESMs. The causes of these weaknesses were explored.

physics.ao-ph

Testing for the Minimum Mean-Variance Spanning Set

This paper explores the estimation and inference of the minimum spanning set (MSS), the smallest subset of risky assets that spans the mean-variance efficient frontier of the full asset set. We establish identification conditions for the MSS and develop a novel procedure for its estimation and inference. Our theoretical analysis shows that the proposed MSS estimator covers the true MSS with probability approaching 1 and converges asymptotically to the true MSS at any desired confidence level, such as 0.95 or 0.99. Monte Carlo simulations confirm the strong finite-sample performance of the MSS estimator. We apply our method to evaluate the relative importance of individual stock momentum and factor momentum strategies, along with a set of well-established stock return factors. The empirical results highlight factor momentum, along with several stock momentum and return factors, as key drivers of mean-variance efficiency. Furthermore, our analysis uncovers the sources of contribution from these factors and provides a ranking of their relative importance, offering new insights into their roles in mean-variance analysis.

q-fin.PM