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Identification, Estimation and Testing of Conditionally Heteroskedastic Factor Model

Enrique Sentana () and Gabriele Fiorentini ()

Working Papers from Centro de Estudios Monetarios Y Financieros-

Abstract: We investigate several important inference issues for factor models with dynamic heteroskedasticity in the common factors. First, we show that such models are identified if we take into account the time-variation in the variances of the factors. Our results also apply to dynamic versions of the APT, dynamic factor models, and vector autoregressions. Secondly, we propose a consistent two-step estimation procedure which does not rely on knowledge of any factor estimates, and explain how to compute correct standard errors.

Keywords: HETEROSKEDASTICITY; MODELS; TESTS (search for similar items in EconPapers)
JEL-codes: C15 C52 (search for similar items in EconPapers)
Pages: 41 pages
Date: 1997
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Journal Article: Identification, estimation and testing of conditionally heteroskedastic factor models (2001) Downloads
Working Paper: Identification, estimation and testing of conditionally heteroskedastic factor models (1997) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fth:cemfdt:9709

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