Selecting the Correct Number of Factors in Approximate Factor Models: The Large Panel Case With Group Bridge Estimators
使用组桥估计量选择近似因子模型的正确因子数:大面板情形
This article proposes a group bridge estimator to select the correct number of factors in approximate factor models. It contributes to the literature on shrinkage estimation and factor models by extending the conventional bridge estimator from a single equation to a large panel context. The proposed estimator can consistently estimate the factor loadings of relevant factors and shrink the loadings of irrelevant factors to zero with a probability approaching one. Hence, it…