Author: Catano, Duv'an Humberto; Rodr'iguez-Caballero, C. Vladimir; Pena, Daniel; Chiann, Chang
Title: Wavelet Estimation for Factor Models with Time-Varying Loadings Cord-id: yk6emfmn Document date: 2021_10_9
ID: yk6emfmn
Snippet: We introduce a high-dimensional factor model with time-varying loadings. We cover both stationary and nonstationary factors to increase the possibilities of applications. We propose an estimation procedure based on two stages. First, we estimate common factors by principal components. In the second step, considering the estimated factors as observed, the time-varying loadings are estimated by an iterative generalized least squares procedure using wavelet functions. We investigate the finite samp
Document: We introduce a high-dimensional factor model with time-varying loadings. We cover both stationary and nonstationary factors to increase the possibilities of applications. We propose an estimation procedure based on two stages. First, we estimate common factors by principal components. In the second step, considering the estimated factors as observed, the time-varying loadings are estimated by an iterative generalized least squares procedure using wavelet functions. We investigate the finite sample features by some Monte Carlo simulations. Finally, we apply the model to study the Nord Pool power market's electricity prices and loads.
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