This paper studies panel data models with unobserved group factor structures. The group membership of each unit and the number of groups are left unspecified. We estimate the model by minimizing the sum of least squared errors with a shrinkage penalty. The regressions coefficients can be...

In this paper we develop some econometric theory for factor models of large dimensions. The focus is the determination of the number of factors (r), which is an unresolved issue in the rapidly growing literature on multifactor models. We first establish the convergence rate for the factor...