Distinguishing Time-Varying Factor Models
Bibliographic Data
| ID | 19419391 |
|---|---|
| Authors | Zhonghao Fu (Fudan University), Liangjun Su (0000-0002-0565-6928, Tsinghua University), Xia Wang (0000-0002-5256-0611, Renmin University of China, corresponding author) |
| Year | 2025 |
| Volume | 43 |
| Issue | 3 |
| Pages | 508-519 |
| Publication date | 2025-07-03 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.2024.2395424 |
| OpenAlex | W4401886014 |
| Language | EN |
| Citations received | 2 |
| References cited | 56 |
Time-varying factor models have been widely used to model changing relationships among economic and financial variables. The existing literature usually specifies the time-varying factor loadings as deterministic functions of time or unit root processes. This article proposes two consistent tests to distinguish between these two specifications based on a randomization approach. By setting the null hypothesis as either specification, we show that the proposed test statistics follow an asymptotic Chi-squared distribution under the respective null hypotheses and diverge to infinity in probability under the respective alternatives. Simulation studies reveal that both test statistics perform reasonably well in finite samples. We apply the proposed tests to the U.S. macroeconomic and global macroeconomic and financial datasets. The results suggest that the time-varying factor loadings as deterministic functions of time should be adopted for these two applications
Alternative hypothesis · Data mining · Econometrics · Factor analysis · Infinity · Null hypothesis · Statistical hypothesis testing · Statistics · Unit root · Complex Systems and Time Series Analysis · Computer Science · Economic theories and models · Mathematics · Monetary Policy and Economic Impact
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Forecasting Using Principal Components From a Large Number of Predictors
The Evolving Impact of Global, Region-Specific, and Country-Specific Uncertainty
Testing for Common Trends in Nonstationary Large Datasets
Testing Alphas in Conditional Time-Varying Factor Models With High-Dimensional Assets
Estimation and Inference on Time-Varying Favar Models
Estimation of Sparsity-Induced Weak Factor Models
| Unique citing works | 2 |
|---|---|
| Citations per year | 2 |
| Citation span | 2026 - 2026 (1) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 2 |