Quantile factor models
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Publication:5860032
DOI10.3982/ECTA15746zbMATH Open1478.62090arXiv1911.02173OpenAlexW3138290602MaRDI QIDQ5860032FDOQ5860032
Authors: Liang Chen, Juan J. Dolado, Jesús Gonzalo 
Publication date: 18 November 2021
Published in: Econometrica (Search for Journal in Brave)
Abstract: Quantile Factor Models (QFM) represent a new class of factor models for high-dimensional panel data. Unlike Approximate Factor Models (AFM), where only location-shifting factors can be extracted, QFM also allow to recover unobserved factors shifting other relevant parts of the distributions of observed variables. A quantile regression approach, labeled Quantile Factor Analysis (QFA), is proposed to consistently estimate all the quantile-dependent factors and loadings. Their asymptotic distribution is then derived using a kernel-smoothed version of the QFA estimators. Two consistent model selection criteria, based on information criteria and rank minimization, are developed to determine the number of factors at each quantile. Moreover, in contrast to the conditions required for the use of Principal Components Analysis in AFM, QFA estimation remains valid even when the idiosyncratic errors have heavy-tailed distributions. Three empirical applications (regarding macroeconomic, climate and finance panel data) provide evidence that extra factors shifting the quantiles other than the means could be relevant in practice.
Full work available at URL: https://arxiv.org/abs/1911.02173
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Nonparametric regression and quantile regression (62G08) Factor analysis and principal components; correspondence analysis (62H25) Applications of statistics to economics (62P20)
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