A Canonical Correlation Approach for Selecting the Number of Dynamic Factors

Breitung, Jörg ; Pigorsch, Uta

DOI: https://doi.org/10.1111/obes.12003
URL: http://onlinelibrary.wiley.com/doi/10.1111/obes.12...
Document Type: Article
Year of publication: 2013
The title of a journal, publication series: Oxford Bulletin of Economics and Statistics
Volume: 75
Issue number: 1
Page range: 23-36
Place of publication: Oxford [u.a.]
Publishing house: Wiley-Blackwell
ISSN: 0305-9049 , 1468-0084
Publication language: English
Institution: Außerfakultäre Einrichtungen > SFB 884
Subject: 310 Statistics
Abstract: In this article, we propose a selection procedure that allows us to consistently estimate the number of dynamic factors in a dynamic factor model. The procedure is based on a canonical correlation analysis of the static factors which has the advantage of being invariant to a rescaling of the factors. Monte Carlo simulations suggest that the proposed selection rule outperforms existing ones, in particular, if the contribution of the common factors to the overall variance is moderate or low. The new selection procedure is applied to the US macroeconomic data panel used in Stock and Watson [NBER working paper 11467 (2005)].

Dieser Eintrag ist Teil der Universitätsbibliographie.

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