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Structural Changes in High Dimensional Factor Models |
Jushan Bai1(),Xu Han2() |
1. Department of Economics, Columbia University, New York, NY 10027, USA; School of Finance, Nankai University, Tianjin 300071, China 2. Department of Economics and Finance, City University of Hong Kong, Hong Kong, China |
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Abstract This paper provides a survey on recent developments in structural changes for high dimensional factor models. Compared with conventional low-dimensional time series, structural changes in factor models are more complicated due to the unobservability of factors and factor loadings. The following topics are covered in this survey: the identification conditions for the structural changes in the factor loadings, different impacts of big and small breaks in factor models, tests for structural changes in the factor loadings of a specific variable, tests for structural changes in the factor loading matrix, joint tests for structural changes in the factor loadings and coefficients in factor-augmented regressions, tests for smooth changes in the factor loadings, estimation of break dates, and model selection in factor models with structural changes via the shrinkage method.
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Keywords
factor models
structural changes
break date
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Issue Date: 22 March 2016
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