Wavelet Estimation for Dynamic Factor Models with Time-Varying Loadings

Publikation: Working paperForskning

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  • rp19_23

    Forlagets udgivne version, 1,18 MB, PDF-dokument

We introduce a non-stationary high-dimensional factor model with time-varying loadings. We propose an estimation procedure based on two stages. First, we estimate common factors by principal components. Afterwards, in the second step, considering the factors estimates as observed, the time-varying loadings are estimated by an iterative procedure of generalized least squares using wavelet functions. We investigate the finite sample features of the proposed methodology by some Monte Carlo simulations. Finally, we use this methodology to study the electricity prices and loads of the Nord Pool power market.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider28
StatusUdgivet - 9 dec. 2019
SerietitelCREATES Research Papers
Nummer2019-23

    Forskningsområder

  • Factor models, Wavelet functions, Generalized least squares, Electricity prices and loads

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