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Tests of Rank in Reduced Rank Regression Models

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  • Camba-Mendez, Gonzalo, et al
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    Abstract

    There has recently been renewed research interest in the development of tests of the rank of a matrix. This article evaluates the performance of some asymptotic tests of rank determination in reduced rank regression models together with bootstrapped versions through simulation experiments. The bootstrapped procedures significantly improve on the performance of the corresponding asymptotic tests. The article also presents a Monte Carlo exercise comparing the forecasting performance of reduced rank and unrestricted vector autoregressive (VAR) models in which the former appear superior. The tests of rank considered here are then applied to construct reduced rank VAR models for leading indicators of U.K. economic activity. These more parsimonious multivariate representations display an improvement in forecasting performance over that of unrestricted VAR models.

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    Bibliographic Info

    Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

    Volume (Year): 21 (2003)
    Issue (Month): 1 (January)
    Pages: 145-55

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    Handle: RePEc:bes:jnlbes:v:21:y:2003:i:1:p:145-55

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    Cited by:
    1. Andrea Carriero & George Kapetanios & Massimiliano Marcellino, 2011. "Forecasting large datasets with Bayesian reduced rank multivariate models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(5), pages 735-761, 08.
    2. Donald, Stephen G. & Fortuna, Nat rcia & Pipiras, Vladas, 2007. "On Rank Estimation In Symmetric Matrices: The Case Of Indefinite Matrix Estimators," Econometric Theory, Cambridge University Press, vol. 23(06), pages 1217-1232, December.
    3. Andrea Carriero & George Kapetanios & Massimiliano Marcellino, 2007. "Forecasting Large Datasets with Reduced Rank Multivariate Models," Working Papers 617, Queen Mary, University of London, School of Economics and Finance.
    4. Gianluca Cubadda, 2007. "A Reduced Rank Regression Approach to Coincident and Leading Indexes Building," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(2), pages 271-292, 04.
    5. Majid Al-Sadoon, 2014. "A General Theory of Rank Testing," Working Papers 750, Barcelona Graduate School of Economics.

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