Testing for structural changes in factor models via a nonparametric regression

• Main Authors: SU, Liangjun, WANG, Xia
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Factor model; Test; Local smoothing; Structural change; Local power; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2465; https://ink.library.smu.edu.sg/context/soe_research/article/3464/viewcontent/factor_breaks20190910_sv.pdf
• Institution: Singapore Management University

We propose a model-free test for structural changes in factor models. The basic idea is to regress the data on commonly estimated factors by local smoothing and compare the fitted values of time-varying factor loadings with those of time-invariant factor loadings estimated via principal component an...