Jushan Bai, Jiangtao Duan, Xu Han
arXiv 16 Jun 2022 · Econometrics · publishedJournal of Econometrics (2024) · 14 citations (OpenAlex)
arXiv:2206.08052 · PDF · DOI · OpenAlex · Extracted main text
A factor model with a break in its factor loadings is observationally equivalent to a model without changes in the loadings but a change in the variance of its factors. This effectively transforms a structural change problem of high dimension into a problem of low dimension. This paper considers the likelihood ratio (LR) test for a variance change in the estimated factors. The LR test implicitly explores a special feature of the estimated factors: the pre-break and post-break variances can be a singular matrix under the alternative hypothesis, making the LR test diverging faster and thus more powerful than Wald-type tests. The better power property of the LR test is also confirmed by simulations. We also consider mean changes and multiple breaks. We apply the procedure to the factor modelling and structural change of the US employment using monthly industry-level-data.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Han, X., Inoue, A (2015) Tests for parameter instability in dynamic factor models self | 0.644 | 2 | 2 | 100% |
| 2 | Ahn, S. and Horenstein, A (2013) Eigenvalue ratio test for the number of factors | 0.511 | 2 | 1 | 100% |
| 3 | Bai, J (2010) Common breaks in means and variances for panel data self | 0.511 | 2 | 1 | 100% |
| 4 | Caner, M. and Han, X (2014) Selecting the Correct Number of Factors in Approximate Factor Models: The Large Panel Case With Group Bridge Estimators self | 0.511 | 2 | 1 | 100% |
| 5 | Onatski, A (2010) Determining the Number of Factors from Empirical Distribution of Eigenvalues | 0.511 | 2 | 1 | 100% |
| 6 | Andrews, D.W.K (1993) Tests for parameter instability and structural change with unknown change point | 0.405 | 1 | 1 | 100% |
| 7 | Bai, J. and Ng, S (2002) Determining the number of factors in approximate factor models self | 0.405 | 1 | 1 | 100% |
| 8 | Chen, L., Dolado, J.J. and Gonzalo, J (2014) Detecting big structural breaks in large factor models | 0.405 | 1 | 1 | 100% |
| 9 | Qu, Z. and Perron, P (2007) Estimating and Testing Structural Changes in Multivariate Regressions | 0.405 | 1 | 1 | 100% |
| Bai | unmatched citation key Bai | 0.000 | 4 | 1 | 0% |
Showing the top 10 of 39 scored citations. 1 of these could not be matched to a bibliography entry, so only the citation key is shown.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Disentangling Structural Breaks in Factor Models for Macroeconomic Data | 0.843 | 3 | 3 |
| 2 | Taxonomy and Estimation of Multiple Breakpoints in High-Dimensional Factor Models | 0.511 | 2 | 1 |
| 3 | Structural Analysis of Vector Autoregressive Models | 0.405 | 1 | 1 |