Online Appendix for Canonical Correlation-based Model Selection for the Multilevel Factors

In Choi, Rui Lin and Yongcheol Shin

No 2009, Working Papers from Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy)

Abstract: We provide additional simulation results and theoretical derivations. Section I provides the simulation results for the performance of the alternative selection criteria for estimating the number of local factors. Section II provides the proofs for Lemmas in Section 4.1.1. Section III describes the detailed estimation algorithms of alternative approaches for selecting the number of global factors. Section IV presents the additional empirical results, showing that the popular systematic risk factors, smb and hml, proposed by Fama and French (1993), do not explain the within and the between correlations. Section V investigates the nite sample performance of the existing model selection criteria that ignore the multilevel structure and demonstrate that the existing selection criteria will produce unreliable inference in nite samples.

Keywords: Multilevel Factor Models; Principal Components; Canonical Correlation Difference; Multilevel Asset Pricing Models (search for similar items in EconPapers)
JEL-codes: C52 G12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020
New Economics Papers: this item is included in nep-ecm and nep-isf
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