Dynamic Factor Analysis with ARMA Factors
AbstractIn this paper we present a new approach to the specification of dynamic factor models. Our model has three advantages over existing work. Firstly, it is based on a minimal-dimension state-space representation giving some gain in computational efficiency over existing methods. Secondly, it easily accommodates hypothesis tests about the order of the factor-filter. Thirdly, by allowing the factor-filter to have a common polynomial factor, ARMA-factor models may be estimated with little extra computational expense over the AR- factor case. We illustrate the use of our model with an application to business cycle analysis.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0145.
Date of creation: 01 Aug 2000
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- Chamberlain, Gary & Rothschild, Michael, 1983.
"Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets,"
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