In this paper we develop some econometric theory for factor models of large dimensions. The focus is the determination of the number of factors (), which is an unresolved issue in the rapidly growing literature on multifactor models. We first establish the convergence rate for the factor estimates that will allow for consistent estimation of . We then propose some panel criteria and show that the number of factors can be consistently estimated using the criteria. The theory is developed under the framework of large cross‐sections () and large time dimensions (). No restriction is imposed on the relation between and . Simulations show that the proposed criteria have good finite sample properties in many configurations of the panel data encountered in practice.
MLA
Bai, Jushan, and Serena Ng. “Determining the Number of Factors in Approximate Factor Models.” Econometrica, vol. 70, .no 1, Econometric Society, 2002, pp. 191-221, https://doi.org/10.1111/1468-0262.00273
Chicago
Bai, Jushan, and Serena Ng. “Determining the Number of Factors in Approximate Factor Models.” Econometrica, 70, .no 1, (Econometric Society: 2002), 191-221. https://doi.org/10.1111/1468-0262.00273
APA
Bai, J., & Ng, S. (2002). Determining the Number of Factors in Approximate Factor Models. Econometrica, 70(1), 191-221. https://doi.org/10.1111/1468-0262.00273
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