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Abstract Details
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Activity Number:
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269
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Type:
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Invited
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Date/Time:
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Tuesday, July 31, 2012 : 8:30 AM to 10:20 AM
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Sponsor:
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JBES-Journal of Business & Economic Statistics
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| Abstract - #303486 |
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Title:
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Robust and Sparse Factor Modeling
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Author(s):
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Christophe Croux and Peter Exterkate*+
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Companies:
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CREATES - Aarhus University and K. U. Leuven
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Address:
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Department of Economics and Business, Aarhus C, 8000, Denmark
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Keywords:
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dimension reduction ;
forecasting ;
outliers ;
regularization ;
sparsity
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Abstract:
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Factor construction methods are widely used to summarize a large panel of variables by means of a relatively small number of representative factors. We propose a novel factor construction procedure that enjoys the properties of robustness to outliers and of sparsity; that is, having relatively few nonzero factor loadings. Compared to the traditional factor construction method, we find that this procedure leads to a favorable forecasting performance in the presence of outliers and to better interpretable factors. We investigate the performance of the method in a Monte Carlo experiment and in an empirical application to a large data set from macroeconomics.
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Authors who are presenting talks have a * after their name.
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