Large dimension forecasting models and random singular value spectra
We present a general method to detect and extract from a finite time sample statistically meaningful correlations between input and output variables of large dimensionality. Our central result is derived from the theory of free random matrices, and gives an explicit expression for the interval where singular values are expected in the absence of any true correlations between the variables under study. Our result can be seen as the natural generalization of the Marcenko-Pastur distribution for the case of rectangular correlation matrices. We illustrate the interest of our method on a set of macroeconomic time series.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
- Woodford, Michael, 1990.
"Learning to Believe in Sunspots,"
Econometric Society, vol. 58(2), pages 277-307, March.
- Jushan Bai & Serena Ng, 2002.
"Determining the Number of Factors in Approximate Factor Models,"
Econometric Society, vol. 70(1), pages 191-221, January.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Econometric Society World Congress 2000 Contributed Papers 1504, Econometric Society.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
- Tom Doan, . "BAING: RATS procedure to estimate factors in a factor model using Bai-Ng formulas," Statistical Software Components RTS00012, Boston College Department of Economics.
- Ben S. Bernanke & Jean Boivin, 2001.
"Monetary Policy in a Data-Rich Environment,"
NBER Working Papers
8379, National Bureau of Economic Research, Inc.
- Granger, Clive W. J., 2001. "Macroeconometrics - Past and future," Journal of Econometrics, Elsevier, vol. 100(1), pages 17-19, January.
- Silverstein, J. W. & Bai, Z. D., 1995. "On the Empirical Distribution of Eigenvalues of a Class of Large Dimensional Random Matrices," Journal of Multivariate Analysis, Elsevier, vol. 54(2), pages 175-192, August.
- Burda, Z. & Görlich, A. & Jarosz, A. & Jurkiewicz, J., 2004. "Signal and noise in correlation matrix," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 295-310.
- James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:physics/0512090. 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: (arXiv administrators)
If references are entirely missing, you can add them using this form.