An approximate factor model of high dimension has two key features. First, the idiosyncratic errors are correlated and heteroskedastic over both the cross-section and time dimensions; the correlations and heteroskedasticities are of unknown forms. Second, the number of variables is comparable or...

This paper investigates efficient estimation of heterogeneous coefficients in panel data models with common shocks, which have been a particular focus of recent theoretical and empirical literature. We propose a new two-step method to estimate the heterogeneous coefficients. In the first step,...

Factor models have been widely used in practice. However, an undesirable feature of a high dimensional factor model is that the model has too many parameters. An effective way to address this issue, proposed in a seminal work by Tsai and Tsay (2010), is to decompose the loadings matrix by a...