We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. The information contained in large datasets is captured by few dynamic common factors, which we assume being conditionally heteroskedastic. After presenting the model, we propose a...

This paper discusses some problems possibly arising when approximating via Monte-Carlo simulations the distributions of goodness-of-fit test statistics based on the empirical distribution function. We argue that failing to re-estimate unknown parameters on each simulated Monte-Carlo sample —...

We use a factor model to detect the presence of economy-wide underlying forces leading firm growth. By using quarterly firm level data on 660 US firms for 20 years, we find evidence of a unique common factor explaining approximately one fifth of the variance of firm growth rates. We investigate...

This paper explores the statistical properties of household consumption-expenditure budget share distributions – defined as the share of household total expenditure spent for purchasing a specific category of commodities – for a large sample of Italian households in the period 1989–2004....

This paper explores the statistical properties of household consumption-expenditure budget shares distributions (HBSDs) – defined as the share of household total expenditure spent for purchasing a specific category of commodities – for a large sample of Italian households in the...

We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. We call the model Dynamic Factor GARCH, as the information contained in large macroeconomic or financial datasets is captured by a few dynamic common factors, which we assume being...

We modify the criterion by Bai and Ng (2002) for determining the number of factors in approximate factor models. As in the original criterion, for any given number of factors we estimate the common and idiosyncratic components of the model by applying principal component analysis. We select the...

The procedure proposed by Bai and Ng (2002) for identifying the number of factors in static factor models is revisited. In order to improve its performance, we introduce a tuning multiplicative constant in the penalty, an idea that was proposed by Hallin and Liska (2007) in the context of...