In this paper we propose a new approximate factor model for large cross-section and time dimensions. Factor loadings are assumed to be smooth functions of time, which allows considering the model as <italic>locally stationary</italic> while permitting empirically observed time-varying second moments. Factor...

This paper investigates the asymptotic theory for a factor GARCH (generalized autoregressive conditional heteroskedasticity) model. Sufficient conditions for asymptotic stability and existence of moments are established. These conditions allow for volatility spillover and integrated GARCH. We...