SMU SOE Seminar Series (March 8, 2024, 10am-11.30am): Detecting Spurious Factor Models

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ABSTRACT Spurious factor behaviors arise in large random matrices with high-rank signal components and heavy-tailed spectral distributions. This paper establishes analytical probabilistic limits and distribution theory of these spurious behaviors for high-dimensional non-stationary integrated systems, and stationary systems with near-unit-root spatial processes across cross sections. We transform scree plots into Hill plots to detect spectral patterns in these spurious factor models and develop multiple t-tests to distinguish between spurious and genuine factor models. Numerical analysis indicates that the existing spurious factor models fit some, but not all, economic datasets. In particular, the term structure of interest rates adheres to genuine factor models rather than the local correlation model. Click here to view the CV. Click here to view the paper.
		PRESENTER Yi He University of Amsterdam
		RESEARCH FIELDS High Dimensional Time Series Extreme Value Statistics Random Matrix Theory
		DATE: 8 March 2024 (Friday)
		TIME: 10am - 11.30am
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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