Approximate factor models with weaker loadings

DOI10.1016/J.JECONOM.2023.01.027MaRDI QIDQ6108332zbMATH OpenOpenAlexFDO

Authors Jushan Bai, Serena Ng

Publication date 29 June 2023

Published in Journal of Econometrics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2109.03773

zbMATH Keywords

factor augmented regressionslow rank decompositionprincipal componentsweak factors

Mathematics Subject Classification ID

Statistics (62-XX) Game theory, economics, finance, and other social and behavioral sciences (91-XX)

Abstract: Pervasive cross-section dependence is increasingly recognized as a characteristic of economic data and the approximate factor model provides a useful framework for analysis. Assuming a strong factor structure where $LopLo/N^{a}lpha$ is positive definite in the limit when $alpha=1$, early work established convergence of the principal component estimates of the factors and loadings up to a rotation matrix. This paper shows that the estimates are still consistent and asymptotically normal when $alphain(0,1]$ albeit at slower rates and under additional assumptions on the sample size. The results hold whether $alpha$ is constant or varies across factor loadings. The framework developed for heterogeneous loadings and the simplified proofs that can be also used in strong factor analysis are of independent interest.

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Cited in

(32)

• Kotlarski with a factor loading
• Cross-section bootstrap for CCE regressions
• Target PCA: transfer learning large dimensional panel data
• On generalized cce estimation
• Tucker tensor factor models: matricization and mode-wise PCA estimation
• Spurious factors in data with local-to-unit roots
• The dynamic, the static, and the weak: factor models and the analysis of high-dimensional time series
• High dimensional factor analysis with weak factors
• Dynamic factor analysis of high-dimensional recurrent events
• A robust residual-based test for structural changes in factor models
• Multilevel matrix factor model
• Distinguishing Time-Varying Factor Models
• Model selection for generalized linear models with weak factors
• Huber principal component analysis for large-dimensional factor models
• Supervised Dynamic PCA: Linear Dynamic Forecasting with Many Predictors
• Covariate-informed reconstruction of partially observed functional data via factor models
• Selecting the number of factors in approximate factor models using group variable regularization
• SFQRA: scaled factor-augmented quantile regression with aggregation in conditional mean forecasting
• Portfolio selection revisited
• On high-dimensional wavelet eigenanalysis
• Moving sum procedure for multiple change point detection in large factor models
• High-dimensional conditional factor model
• Diffusion index forecasting with tensor data
• Instability of Factor Strength in Asset Returns
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• Sparse factor model for high dimensional time series
• Identification through sparsity in factor models: the _1-rotation criterion
• Rank and Factor Loadings Estimation in Time Series Tensor Factor Model by Pre-averaging

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