Estimating the number of common factors in serially dependent approximate factor models

Ryan Greenaway-McGrevy, Chirok Han and Donggyu Sul ()

Economics Letters, 2012, vol. 116, issue 3, 531-534

Abstract: A simple data-dependent filtering method is proposed before applying the Bai–Ng method to estimate the number of common factors in the conventional approximate factor model. The asymptotic justification is provided and the finite-sample performance is examined.

Keywords: Factor model; Prewhitening; Least squares dummy variable (LSDV) filter; Factor number estimation; Cross-section dependence (search for similar items in EconPapers)
JEL-codes: C33 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:116:y:2012:i:3:p:531-534

DOI: 10.1016/j.econlet.2012.03.031

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