Reduced‐form factor augmented VAR—Exploiting sparsity to include meaningful factors
简约式因子扩展 VAR：利用稀疏性纳入具有经济含义的因子
Summary Induced sparsity in the factor loading matrix identifies the factor basis, while rotational identification is obtained ex post by clustering methods closely related to machine learning. We extract meaningful economic concepts from a high‐dimensional data set, which together with observed variables follow an unrestricted, reduced‐form VAR process. Including a comprehensive set of economic concepts allows reliable, fundamental structural analysis, even of the factor…