Determining the Number of Factors in Approximate Factor Models
Title | Determining the Number of Factors in Approximate Factor Models PDF eBook |
Author | Jushan Bai |
Publisher | |
Pages | 0 |
Release | 2002 |
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In this paper we develop some econometric theory for factor models of large dimensions. The focus is the determination of the number of factors (r), which is an unresolved issue in the rapidly growing literature on multifactor models. We first establish the convergence rate for the factor estimates that will allow for consistent estimation of r. We then propose some panel criteria and show that the number of factors can be consistently estimated using the criteria. The theory is developed under the framework of large cross-sections (N) and large time dimensions (T). No restriction is imposed on the relation between N and T. Simulations show that the proposed criteria have good finite sample properties in many configurations of the panel data encountered in practice.
A Testing Procedure for Determining the Number of Factors in Approximate Factor Models with Large Datasets
Title | A Testing Procedure for Determining the Number of Factors in Approximate Factor Models with Large Datasets PDF eBook |
Author | |
Publisher | |
Pages | |
Release | 2005 |
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Large Dimensional Factor Analysis
Title | Large Dimensional Factor Analysis PDF eBook |
Author | Jushan Bai |
Publisher | Now Publishers Inc |
Pages | 90 |
Release | 2008 |
Genre | Business & Economics |
ISBN | 1601981449 |
Large Dimensional Factor Analysis provides a survey of the main theoretical results for large dimensional factor models, emphasizing results that have implications for empirical work. The authors focus on the development of the static factor models and on the use of estimated factors in subsequent estimation and inference. Large Dimensional Factor Analysis discusses how to determine the number of factors, how to conduct inference when estimated factors are used in regressions, how to assess the adequacy pf observed variables as proxies for latent factors, how to exploit the estimated factors to test unit root tests and common trends, and how to estimate panel cointegration models.
Time Series in High Dimension: the General Dynamic Factor Model
Title | Time Series in High Dimension: the General Dynamic Factor Model PDF eBook |
Author | Marc Hallin |
Publisher | World Scientific Publishing Company |
Pages | 764 |
Release | 2020-03-30 |
Genre | Business & Economics |
ISBN | 9789813278004 |
Factor models have become the most successful tool in the analysis and forecasting of high-dimensional time series. This monograph provides an extensive account of the so-called General Dynamic Factor Model methods. The topics covered include: asymptotic representation problems, estimation, forecasting, identification of the number of factors, identification of structural shocks, volatility analysis, and applications to macroeconomic and financial data.
A Test for the Number of Factors in an Approximate Factor Model
Title | A Test for the Number of Factors in an Approximate Factor Model PDF eBook |
Author | Robert A. Korajczyk |
Publisher | |
Pages | 47 |
Release | 2009 |
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An important issue in applications of multifactor models of asset returns is the appropriate number of factors. Most extant tests for the number of factors are valid only for strict factor models, in which diversifiable returns are uncorrelated across assets. In this paper we develop a test statistic to determine the number of factors in an approximate factor model of asset returns, which does not require that diversifiable components of returns be uncorrelated across assets. We find evidence for one to six pervasive factors in the cross-section of New York Stock Exchange and American Stock Exchange stock returns.
A Robust Criterion for Determining the Number of Static Factors in Approximate Factor Models
Title | A Robust Criterion for Determining the Number of Static Factors in Approximate Factor Models PDF eBook |
Author | |
Publisher | |
Pages | 41 |
Release | 2007 |
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We propose a refinement of the criterion by Bai and Ng [2002] for determining the number of static factors in factor models with large datasets. It consists in multiplying the penalty function times a constant which tunes the penalizing power of the function itself as in the Hallin and Lika [2007] criterion for the number of dynamic factors. By iteratively evaluating the criterion for different values of this constant, we achieve more robust results than in the case of fixed penalty function. This is shown by means of Monte Carlo simulations on seven data generating processes, including heteroskedastic processes, on samples of different size. -- Approximate factor models ; Information criterion ; Number of factors
Dynamic Factor Models
Title | Dynamic Factor Models PDF eBook |
Author | Jörg Breitung |
Publisher | |
Pages | 29 |
Release | 2005 |
Genre | |
ISBN | 9783865580979 |