Determining the number of breaks in large dimensional factor models with structural changes

Lu Wang, Ruichao Zhou and Jianhong Wu

Economics Letters, 2021, vol. 199, issue C

Abstract: This paper considers a large dimensional factor model with multiple structural changes in factor loadings. A novel two-step procedure is proposed to estimate the number of breaks. First, a sequential estimation method is applied to estimate break points one by one for a given number of breaks. Then the number of breaks can be consistently determined by some information criteria. Simulation results confirm the desired performance of the estimation procedure in finite samples.

Keywords: Information criterion; Large dimensional factor models; Structural changes; The number of breaks (search for similar items in EconPapers)
JEL-codes: C12 C23 C33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:199:y:2021:i:c:s0165176520304675

DOI: 10.1016/j.econlet.2020.109707

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