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Maximum likelihood estimation for dynamic factor models with missing data

Author

Listed:
  • B. Jungbacker

    (Department of Econometrics [Amsterdam] - UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam)

  • S.J. Koopman

    (Department of Econometrics [Amsterdam] - UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam, Tinbergen Institute - Tinbergen Institute)

  • M. van Der Wel

    (Department of Econometrics [Amsterdam] - UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam, Erasmus University Rotterdam and CREATES - Erasmus University Rotterdam and CREATES)

Abstract

This paper concerns estimating parameters in a high-dimensional dynamic factor model by the method of maximum likelihood. To accommodate missing data in the analysis, we propose a new model representation for the dynamic factor model. It allows the Kalman filter and related smoothing methods to evaluate the likelihood function and to produce optimal factor estimates in a computationally efficient way when missing data is present. The implementation details of our methods for signal extraction and maximum likelihood estimation are discussed. The computational gains of the new devices are presented based on simulated data sets with varying numbers of missing entries.

Suggested Citation

  • B. Jungbacker & S.J. Koopman & M. van Der Wel, 2011. "Maximum likelihood estimation for dynamic factor models with missing data," Post-Print hal-00828980, HAL.
    • Handle: RePEc:hal:journl:hal-00828980
    DOI: 10.1016/j.jedc.2011.03.009
    Note: View the original document on HAL open archive server: https://hal.science/hal-00828980
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    More about this item

    Keywords

    C33; C43; High-dimensional vector series; Kalman filtering and smoothing; Unbalanced panels of time series;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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