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Principal Component Analysis for a Mix of Stationary and Nonstationary Variables

James D. Hamilton, Xinwei Ma, Jin Xi

arXiv 24 Aug 2026 · Econometrics

arXiv:2608.23732 · PDF · Extracted main text

Abstract

This paper develops a procedure for uncovering the common cyclical factors that drive a mix of stationary and nonstationary variables. The method does not require knowing which variables are nonstationary or the nature of the nonstationarity. An application to the FRED-MD macroeconomic dataset demonstrates that the approach offers similar benefits to those of traditional principal component analysis with some added advantages.

Citation extraction

27
references
94
in-text mentions
27
distinct cited
2
self-citations
16,524
main-text words

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Most heavily cited references

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.

ReferenceIntensityMentionsSectionsMain text
1Hamilton, James D (2018) Why you should never use the Hodrick- Prescott filter self1.00093100%
2Onatski, Alexei and Wang, Chen (2021) Spurious Factor Analysis1.00073100%
3Stock, James H and Watson, Mark W (2002) Forecasting using principal components from a large number of predictors1.00073100%
4Stock, James H and Watson, Mark W (2016) Dynamic Factor Models, Factor-Augmented Vector Autoregressions, and Structural Vector Autoregressions in Macroeconomics0.92843100%
5Bai, Jushan and Ng, Serena (2002) Determining the Number of Factors in Approximate Factor Models0.81142100%
6Bai, Jushan and Ng, Serena (2004) A PANIC attack on unit roots and cointegration0.73732100%
7McCracken, Michael W and Ng, Serena (2016) FRED- MD: A monthly database for macroeconomic research0.693271100%
8Stock, James H and Watson, Mark W (1999) Forecasting inflation0.693101100%
9Barigozzi, Matteo and Lippi, Marco and Luciani, Matteo (2021) Large-Dimensional Dynamic Factor Models: Estimation of Impulse–Response Functions with I(1) Cointegrated Factors0.58531100%
10Stock, James H and Watson, Mark W (2014) Estimating Turning Points Using Large Data Sets0.51121100%

Showing the top 10 of 27 scored citations.