Testing Hypotheses About the Number of Factors in Large Factor Models
In this paper we study high-dimensional time series that have the generalized dynamic factor structure. We develop a test of the null of k 0 factors against the alternative that the number of factors is larger than k 0 but no larger than k 1 >k 0 . Our test statistic equals max k 0 >k⩽k 1 (Gamma k - Gamma k+1 )(Gamma k+1 - Gamma k+2 ), where Gamma i is the ith largest eigenvalue of the smoothed periodogram estimate of the spectral density matrix of data at a prespecified frequency. We describe the asymptotic distribution of the statistic, as the dimensionality and the number of observations rise, as a function of the Tracy-Widom distribution and tabulate the critical values of the test. As an application, we test different hypotheses about the number of dynamic factors in macroeconomic time series and about the number of dynamic factors driving excess stock returns. Copyright 2009 The Econometric Society.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 77 (2009)
Issue (Month): 5 (09)
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/
More information through EDIRC
|Order Information:|| Web: https://www.econometricsociety.org/publications/econometrica/access/ordering-back-issues Email: |
When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:77:y:2009:i:5:p:1447-1479. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.