Inference on matrix-valued factor models under a fixed time horizon

Ying Lun Cheung

Econometric Reviews, 2025, vol. 44, issue 10, 1518-1540

Abstract: This article considers the estimation and inference of matrix-valued factor models under a fixed time horizon. We show that the 2dPCA method maintains consistency and asymptotic normality. However, the conventional Newey-West method becomes infeasible, posing challenges for making inferences. To address this limitation, we introduce an augmented CS-HAC estimator for computing the standard errors. Applying this method to a large set of county-industry-level economic indicators, we identify an aggregate factor, a public sector factor, and a leisure and hospitality factor and show how they are affected differently during the financial crisis and the COVID-19 pandemic.

Date: 2025
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DOI: 10.1080/07474938.2025.2527621

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