Journal ArticleDOI
Eigenvalue Ratio Test for the Number of Factors
Seung C. Ahn,Alex R. Horenstein +1 more
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In this paper, two new estimators for determining the number of factors (r) in static approximate factor models were proposed, based on the well-known fact that the largest eigenvalues of the variance matrix of N response variables grow unboundedly as N increases.Abstract:
This paper proposes two new estimators for determining the number of factors (r) in static approximate factor models We exploit the well-known fact that the r largest eigenvalues of the variance matrix of N response variables grow unboundedly as N increases, while the other eigenvalues remain bounded The new estimators are obtained simply by maximizing the ratio of two adjacent eigenvalues Our simulation results provide promising evidence for the two estimatorsread more
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BookDOI
Dynamic Factor Models
James H. Stock,Mark W. Watson +1 more
TL;DR: In this article, the authors present a survey of dynamic factor models (DFMs), a class of models that has received considerable attention in the past decade because of their ability to model simultaneously and consistently data sets in which the number of series exceeds the total number of time series observations.
Journal ArticleDOI
Cross-Sectional Dependence in Panel Data Analysis
Vasileios Sarafidis,Tom Wansbeek +1 more
TL;DR: In this article, the authors provide an overview of the existing literature on panel data models with error cross-sectional dependence (CSD), and distinguish between weak and strong CSD and link these concepts to the spatial and factor structure approaches.
Journal ArticleDOI
An overview of the estimation of large covariance and precision matrices
Jianqing Fan,Yuan Liao,Han Liu +2 more
TL;DR: In this article, the authors provide a selective review of several recent developments on the estimation of large covariance and precision matrices, focusing on two general approaches: a rank-based method and a factor-model based method.
Large Panel Data Models with Cross-Sectional Dependence: A Surevey
TL;DR: In this paper, the authors provide an overview of the recent literature on estimation and inference in large panel data models with cross-sectional dependence, including static and dynamic models with weakly exogenous regressors.
Book ChapterDOI
Dynamic Factor Models, Factor-Augmented Vector Autoregressions, and Structural Vector Autoregressions in Macroeconomics
TL;DR: In this paper, the authors provide an overview of dynamic factor models (DFMs), their estimation, and their uses in empirical macroeconomics, including the use of DFMs for analysis of structural shocks.
References
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Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The scree test for the number of factors
TL;DR: The Scree Test for the Number Of Factors this paper was first proposed in 1966 and has been used extensively in the field of behavioral analysis since then, e.g., in this paper.
Journal ArticleDOI
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.
Book ChapterDOI
The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets
TL;DR: In this article, the problem of selecting optimal security portfolios by risk-averse investors who have the alternative of investing in risk-free securities with a positive return or borrowing at the same rate of interest and who can sell short if they wish is discussed.