This study investigates how judgments of explanatory power are affected by (i) the prior credibility of a potential explanation, (ii) the causal framing used to describe the explanation, and (iii) the generalizability of the explanation. We found that the prior credibility of a causal explanation plays a central role in explanatory reasoning: first, because of the presence of strong main effect...

Abductive reasoning assigns special status to the explanatory power of a hypothesis. But how do people make explanatory judgments? Our study clarifies this issue by asking: (i) How does the explanatory power of a hypothesis cohere with other cognitive factors? (ii) How does probabilistic information affect explanatory judgments? In order to answer these questions, we conducted an experiment wit...

We provide an econometric analysis for the factor models when the latent factors can be explained partially by several observed explanatory proxies. In financial factor models for instance, the unknown factors can be reasonably well predicted by a few observable proxies, such as the Fama-French factors. In diffusion index forecasts, identified factors are strongly related to several directly me...