Dynamic factor and VARMA models: equivalent representations, dimension reduction and nonlinear matrix equations
Methodology
2023-07-20 v1
Abstract
A dynamic factor model with factor series following a VAR model is shown to have a VARMA model representation. Reduced-rank structures are identified for the VAR and VMA components of the resulting VARMA model. It is also shown how the VMA component parameters can be computed numerically from the original model parameters via the innovations algorithm, and connections of this approach to non-linear matrix equations are made. Some VAR models related to the resulting VARMA model are also discussed.
Cite
@article{arxiv.2307.09974,
title = {Dynamic factor and VARMA models: equivalent representations, dimension reduction and nonlinear matrix equations},
author = {Shankar Bhamidi and Dhruv Patel and Vladas Pipiras},
journal= {arXiv preprint arXiv:2307.09974},
year = {2023}
}