Determining the number of factors and lag order in dynamic factor models: A minimum entropy approach

J.P.A.M. Jacobs, P.W. Otter

Research output: Contribution to journalArticleAcademicpeer-review

10 Citations (Scopus)

Abstract

This article proposes a solution to one of the issues in the rapidly growing literature on dynamic factor models, i.e., how to determine the optimal number of factors. Our formal test, based upon the canonical correlation procedure related to concepts from information theory, produces estimates of the number of factors and the lag order simultaneously. Simulation experiments illustrate the Potential of our approach.
Original languageEnglish
Pages (from-to)385-397
Number of pages13
JournalEconometric Reviews
Volume27
Issue number4-6
DOIs
Publication statusPublished - 2008
EventNAKE Research Day 2005 - , Netherlands
Duration: 1-Oct-2005 → …

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