Detecting irrelevant variables in possible proxies for the latent factors in macroeconomics and finance

Wu, Jianhong,(2019), Detecting irrelevant variables in possible proxies for the latent factors in macroeconomics and finance. , Economics Letters 176 (2019) 60–63, UNSPECIFIED

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Abstract

This paper focuses on evaluating the observed and latent factors in macroeconomics and finance from a new angle. The null hypothesis is that some observed time series is not correlated with each latent factor. This issue is interesting since it can help us to detect irrelevant variables in possible proxies for the latent factors in the macroeconomics and finance field. In this sense, this paper can be seen as the preliminary work of Bai and Ng (2006b) or one of its supplements. Under the null hypothesis and some mild assumptions, the proposed statistic is asymptotically chi-squared distributed. Monte Carlo simulation study shows that the new method has desired performance. A real example is analyzed for illustration
Keywords : Factor analysis Large dimensional panel Latent factor Macroeconomics and finance, UNSPECIFIED
Journal or Publication Title: Economics Letters 176 (2019) 60–63
Volume: 176
Number: UNSPECIFIED
Item Type: Article
Subjects: Ekonomi Pembangunan
Depositing User: Elok Inajati
Date Deposited: 27 Dec 2019 02:18
Last Modified: 27 Dec 2019 02:18
URI: https://repofeb.undip.ac.id/id/eprint/976

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