Modelling multiple time series via common factors

Jiazhu Pan and Qiwei Yao

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We propose a new method for estimating common factors of multiple time series. One distinctive feature of the new approach is that it is applicable to some nonstationary time series. The unobservable, nonstationary factors are identified by expanding the white noise space step by step, thereby solving a high-dimensional optimization problem by several low-dimensional sub-problems. Asymptotic properties of the estimation are investigated. The proposed methodology is illustrated with both simulated and real datasets.

Keywords: Cross-correlation function; dimension reduction; factor model; multivariate time series; nonstationarity; portmanteau test; White noise (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (39)

Published in Biometrika, 2008, 95(2), pp. 365-379. ISSN: 0006-3444

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