Schorfheide, Frank; Cheng, Xu; Liao, Zhipeng - National Bureau of Economic Research (NBER) - 2014
In high-dimensional factor models, both the factor loadings and the number of factors may change over time. This paper proposes a shrinkage estimator that detects and disentangles these instabilities. The new method simultaneously and consistently estimates the number of pre- and post-break...