High frequency factor analysis with partially observable factors

Dachuan Chen, Wenqi Lu and Siyu Xie

Journal of Econometrics, 2025, vol. 251, issue C

Abstract: This paper considers a novel factor structure – Partially Observable Factor Model – where both observable factors and latent factors exist in the model simultaneously. Such factor structure can make sure both interpretability and goodness-of-fit at the same time. Necessary estimation methodologies for this partially observable factor model are developed in this paper for the high frequency data. The proposed estimation methodology is robust to jumps, microstructure noise and asynchronous observation times simultaneously.

Keywords: Endogeneity; Exogeneity; Factor analysis; High frequency data; Instrumental variable; Latent factor; Observable factor; Partially observable factor model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:251:y:2025:i:c:s0304407625001125

DOI: 10.1016/j.jeconom.2025.106058

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