Statistical analysis of factor models of high dimension

DOI10.1214/11-AOS966zbMATH Open1246.62144arXiv1205.6617MaRDI QIDQ450044FDOQ450044

Authors: Kunpeng Li, Jushan Bai 

Publication date: 3 September 2012

Published in: The Annals of Statistics (Search for Journal in Brave)

Abstract: This paper considers the maximum likelihood estimation of factor models of high dimension, where the number of variables (N) is comparable with or even greater than the number of observations (T). An inferential theory is developed. We establish not only consistency but also the rate of convergence and the limiting distributions. Five different sets of identification conditions are considered. We show that the distributions of the MLE estimators depend on the identification restrictions. Unlike the principal components approach, the maximum likelihood estimator explicitly allows heteroskedasticities, which are jointly estimated with other parameters. Efficiency of MLE relative to the principal components method is also considered.

Full work available at URL: https://arxiv.org/abs/1205.6617

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zbMATH Keywords

principal componentsmaximum likelihood estimationfactor loadingsidiosyncratic variances

Mathematics Subject Classification ID

Asymptotic properties of parametric estimators (62F12) Factor analysis and principal components; correspondence analysis (62H25) Asymptotic distribution theory in statistics (62E20)

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