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Regime-switching factor models in which the number of factors defines the regime

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  • Cordis, Adriana S.
  • Kirby, Chris

Abstract

We develop regime-switching factor models in which the number of factors determines the operative economic regime. To illustrate the proposed methodology, we analyze the covariance structure of a widely studied set of 25 equity portfolios.

Suggested Citation

  • Cordis, Adriana S. & Kirby, Chris, 2011. "Regime-switching factor models in which the number of factors defines the regime," Economics Letters, Elsevier, vol. 112(2), pages 198-201, August.
    • Handle: RePEc:eee:ecolet:v:112:y:2011:i:2:p:198-201
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    7. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    8. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
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    Cited by:

    1. Ergemen, Yunus Emre & Rodríguez-Caballero, C. Vladimir, 2023. "Estimation of a dynamic multi-level factor model with possible long-range dependence," International Journal of Forecasting, Elsevier, vol. 39(1), pages 405-430.
    2. MeiChi Huang, 2019. "A Nationwide or Localized Housing Crisis? Evidence from Structural Instability in US Housing Price and Volume Cycles," Computational Economics, Springer;Society for Computational Economics, vol. 53(4), pages 1547-1563, April.

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