Pub Date : 2022-08-08DOI: 10.1080/07350015.2022.2110879
Xuehu Zhu, Qiming Zhang, Lixing Zhu, Jun Zhang, Luoyao Yu
Abstract This article proposes a nonparametric projection-based adaptive-to-model specification test for regressions with discrete and continuous predictors. The test statistic is asymptotically normal under the null hypothesis and omnibus against alternative hypotheses. The test behaves like a locally smoothing test as if the number of continuous predictors was one and can detect the local alternative hypotheses distinct from the null hypothesis at the rate that can be achieved by existing locally smoothing tests for regressions with only one continuous predictor. Because of the model adaptation property, the test can fully use the model structure under the null hypothesis so that the dimensionality problem can be significantly alleviated. A discretization-expectation ordinary least squares estimation approach for partial central subspace in sufficient dimension reduction is developed as a by-product in the test construction. We suggest a residual-based wild bootstrap method to give an approximation by fully using the null model and thus closer to the limiting null distribution than existing bootstrap approximations. We conduct simulation studies to compare it with existing tests and two real data examples for illustration.
{"title":"Specification Testing of Regression Models with Mixed Discrete and Continuous Predictors","authors":"Xuehu Zhu, Qiming Zhang, Lixing Zhu, Jun Zhang, Luoyao Yu","doi":"10.1080/07350015.2022.2110879","DOIUrl":"https://doi.org/10.1080/07350015.2022.2110879","url":null,"abstract":"Abstract This article proposes a nonparametric projection-based adaptive-to-model specification test for regressions with discrete and continuous predictors. The test statistic is asymptotically normal under the null hypothesis and omnibus against alternative hypotheses. The test behaves like a locally smoothing test as if the number of continuous predictors was one and can detect the local alternative hypotheses distinct from the null hypothesis at the rate that can be achieved by existing locally smoothing tests for regressions with only one continuous predictor. Because of the model adaptation property, the test can fully use the model structure under the null hypothesis so that the dimensionality problem can be significantly alleviated. A discretization-expectation ordinary least squares estimation approach for partial central subspace in sufficient dimension reduction is developed as a by-product in the test construction. We suggest a residual-based wild bootstrap method to give an approximation by fully using the null model and thus closer to the limiting null distribution than existing bootstrap approximations. We conduct simulation studies to compare it with existing tests and two real data examples for illustration.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"1101 - 1115"},"PeriodicalIF":3.0,"publicationDate":"2022-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48057158","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-08DOI: 10.1080/07350015.2022.2110881
W. Horrace, Hyunseok Jung, Yoonseok Lee
Abstract We apply the adaptive LASSO to select a set of maximally efficient firms in the panel fixed-effect stochastic frontier model. The adaptively weighted L 1 penalty with sign restrictions allows simultaneous selection of a group of maximally efficient firms and estimation of firm-level inefficiency parameters with a faster rate of convergence than least squares dummy variable estimators. Our estimator possesses the oracle property. We propose a tuning parameter selection criterion and an efficient optimization algorithm based on coordinate descent. We apply the method to estimate a group of efficient police officers who are best at detecting contraband in motor vehicle stops (i.e., search efficiency) in Syracuse, NY.
{"title":"LASSO for Stochastic Frontier Models with Many Efficient Firms","authors":"W. Horrace, Hyunseok Jung, Yoonseok Lee","doi":"10.1080/07350015.2022.2110881","DOIUrl":"https://doi.org/10.1080/07350015.2022.2110881","url":null,"abstract":"Abstract We apply the adaptive LASSO to select a set of maximally efficient firms in the panel fixed-effect stochastic frontier model. The adaptively weighted L 1 penalty with sign restrictions allows simultaneous selection of a group of maximally efficient firms and estimation of firm-level inefficiency parameters with a faster rate of convergence than least squares dummy variable estimators. Our estimator possesses the oracle property. We propose a tuning parameter selection criterion and an efficient optimization algorithm based on coordinate descent. We apply the method to estimate a group of efficient police officers who are best at detecting contraband in motor vehicle stops (i.e., search efficiency) in Syracuse, NY.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"1132 - 1142"},"PeriodicalIF":3.0,"publicationDate":"2022-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48059493","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-08DOI: 10.1080/07350015.2022.2110882
L. Simar, P. W. Wilson
Abstract Stochastic frontier models along the lines of Aigner et al. are widely used to benchmark firms’ performances in terms of efficiency. The models are typically fully parametric, with functional form specifications for the frontier as well as both the noise and the inefficiency processes. Studies such as Kumbhakar et al. have attempted to relax some of the restrictions in parametric models, but so far all such approaches are limited to a univariate response variable. Some (e.g., Simar and Zelenyuk; Kuosmanen and Johnson) have proposed nonparametric estimation of directional distance functions to handle multiple inputs and outputs, raising issues of endogeneity that are either ignored or addressed by imposing restrictive and implausible assumptions. This article extends nonparametric methods developed by Simar et al. and Hafner et al. to allow multiple inputs and outputs in an almost fully nonparametric framework while avoiding endogeneity problems. We discuss properties of the resulting estimators, and examine their finite-sample performance through Monte Carlo experiments. Practical implementation of the method is illustrated using data on U.S. commercial banks.
{"title":"Nonparametric, Stochastic Frontier Models with Multiple Inputs and Outputs","authors":"L. Simar, P. W. Wilson","doi":"10.1080/07350015.2022.2110882","DOIUrl":"https://doi.org/10.1080/07350015.2022.2110882","url":null,"abstract":"Abstract Stochastic frontier models along the lines of Aigner et al. are widely used to benchmark firms’ performances in terms of efficiency. The models are typically fully parametric, with functional form specifications for the frontier as well as both the noise and the inefficiency processes. Studies such as Kumbhakar et al. have attempted to relax some of the restrictions in parametric models, but so far all such approaches are limited to a univariate response variable. Some (e.g., Simar and Zelenyuk; Kuosmanen and Johnson) have proposed nonparametric estimation of directional distance functions to handle multiple inputs and outputs, raising issues of endogeneity that are either ignored or addressed by imposing restrictive and implausible assumptions. This article extends nonparametric methods developed by Simar et al. and Hafner et al. to allow multiple inputs and outputs in an almost fully nonparametric framework while avoiding endogeneity problems. We discuss properties of the resulting estimators, and examine their finite-sample performance through Monte Carlo experiments. Practical implementation of the method is illustrated using data on U.S. commercial banks.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"1391 - 1403"},"PeriodicalIF":3.0,"publicationDate":"2022-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48001020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-08DOI: 10.1080/07350015.2022.2110880
Ekaterina Kazak, W. Pohlmeier
Abstract This article exploits the idea of combining pretesting and bagging to choose between competing portfolio strategies. We propose an estimator for the portfolio weight vector, which optimally trades off Type I against Type II errors when choosing the best investment strategy. Furthermore, we accommodate the idea of bagging in the portfolio testing problem, which helps to avoid sharp thresholding and reduces turnover costs substantially. Our Bagged Pretested Portfolio Selection (BPPS) approach borrows from both the shrinkage and the forecast combination literature. The portfolio weights of our strategy are weighted averages of the portfolio weights from a set of stand-alone strategies. More specifically, the weights are generated from pseudo-out-of-sample portfolio pretesting, such that they reflect the probability that a given strategy will be overall best performing. The resulting strategy allows for a flexible and smooth switch between the underlying strategies and outperforms the corresponding stand-alone strategies. Besides yielding high point estimates of the portfolio performance measures, the BPPS approach performs exceptionally well in terms of precision and is robust against outliers resulting from the choice of the asset space.
{"title":"Bagged Pretested Portfolio Selection","authors":"Ekaterina Kazak, W. Pohlmeier","doi":"10.1080/07350015.2022.2110880","DOIUrl":"https://doi.org/10.1080/07350015.2022.2110880","url":null,"abstract":"Abstract This article exploits the idea of combining pretesting and bagging to choose between competing portfolio strategies. We propose an estimator for the portfolio weight vector, which optimally trades off Type I against Type II errors when choosing the best investment strategy. Furthermore, we accommodate the idea of bagging in the portfolio testing problem, which helps to avoid sharp thresholding and reduces turnover costs substantially. Our Bagged Pretested Portfolio Selection (BPPS) approach borrows from both the shrinkage and the forecast combination literature. The portfolio weights of our strategy are weighted averages of the portfolio weights from a set of stand-alone strategies. More specifically, the weights are generated from pseudo-out-of-sample portfolio pretesting, such that they reflect the probability that a given strategy will be overall best performing. The resulting strategy allows for a flexible and smooth switch between the underlying strategies and outperforms the corresponding stand-alone strategies. Besides yielding high point estimates of the portfolio performance measures, the BPPS approach performs exceptionally well in terms of precision and is robust against outliers resulting from the choice of the asset space.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"1116 - 1131"},"PeriodicalIF":3.0,"publicationDate":"2022-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41418356","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-29DOI: 10.1080/07350015.2022.2104857
R. Braun, R. Brüggemann
ABSTRACT We discuss combining sign restrictions with information in external instruments (proxy variables) to identify structural vector autoregressive (SVAR) models. In one setting, we assume the availability of valid external instruments. Sign restrictions may then be used to identify further orthogonal shocks, or as an additional piece of information to pin down the shocks identified by the external instruments more precisely. In a second setting, we assume that proxy variables are only “plausibly exogenous” and suggest various types of inequality restrictions to bound the relation between structural shocks and the external variable. This can be combined with conventional sign restrictions to further narrow down the set of admissible models. Within a proxy-augmented SVAR, we conduct Bayesian inference and discuss computation of Bayes factors. They can be useful to test either the sign- or IV restrictions as overidentifying. We illustrate the usefulness of our methodology in estimating the effects of oil supply and monetary policy shocks.
{"title":"Identification of SVAR Models by Combining Sign Restrictions With External Instruments","authors":"R. Braun, R. Brüggemann","doi":"10.1080/07350015.2022.2104857","DOIUrl":"https://doi.org/10.1080/07350015.2022.2104857","url":null,"abstract":"ABSTRACT We discuss combining sign restrictions with information in external instruments (proxy variables) to identify structural vector autoregressive (SVAR) models. In one setting, we assume the availability of valid external instruments. Sign restrictions may then be used to identify further orthogonal shocks, or as an additional piece of information to pin down the shocks identified by the external instruments more precisely. In a second setting, we assume that proxy variables are only “plausibly exogenous” and suggest various types of inequality restrictions to bound the relation between structural shocks and the external variable. This can be combined with conventional sign restrictions to further narrow down the set of admissible models. Within a proxy-augmented SVAR, we conduct Bayesian inference and discuss computation of Bayes factors. They can be useful to test either the sign- or IV restrictions as overidentifying. We illustrate the usefulness of our methodology in estimating the effects of oil supply and monetary policy shocks.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"1077 - 1089"},"PeriodicalIF":3.0,"publicationDate":"2022-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44798055","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-15DOI: 10.1080/07350015.2022.2102023
James P. Ziliak, Charles M. Hokayem, C. Bollinger
Abstract We document trends in earnings volatility separately by gender using unique linked survey data from the CPS ASEC and Social Security earnings records for the tax years spanning 1995–2015. The exact data link permits us to focus on differences in measured volatility from earnings nonresponse, survey attrition, and measurement between survey and administrative earnings data reports, while holding constant the sampling frame. Our results for both men and women suggest that the level and trend in volatility is similar in the survey and administrative data, showing substantial business-cycle sensitivity among men but no overall trend among continuous workers, while women demonstrate no change in earnings volatility over the business cycle but a declining trend. A substantive difference emerges with the inclusion of imputed earnings among survey nonrespondents, suggesting that users of the ASEC drop earnings nonrespondents.
{"title":"Trends in Earnings Volatility Using Linked Administrative and Survey Data","authors":"James P. Ziliak, Charles M. Hokayem, C. Bollinger","doi":"10.1080/07350015.2022.2102023","DOIUrl":"https://doi.org/10.1080/07350015.2022.2102023","url":null,"abstract":"Abstract We document trends in earnings volatility separately by gender using unique linked survey data from the CPS ASEC and Social Security earnings records for the tax years spanning 1995–2015. The exact data link permits us to focus on differences in measured volatility from earnings nonresponse, survey attrition, and measurement between survey and administrative earnings data reports, while holding constant the sampling frame. Our results for both men and women suggest that the level and trend in volatility is similar in the survey and administrative data, showing substantial business-cycle sensitivity among men but no overall trend among continuous workers, while women demonstrate no change in earnings volatility over the business cycle but a declining trend. A substantive difference emerges with the inclusion of imputed earnings among survey nonrespondents, suggesting that users of the ASEC drop earnings nonrespondents.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"12 - 19"},"PeriodicalIF":3.0,"publicationDate":"2022-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42002407","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-06DOI: 10.1080/07350015.2022.2097913
T. Ando, Jushan Bai
ABSTRACT This article provides methods for flexibly capturing unobservable heterogeneity from longitudinal data in the context of an exponential family of distributions. The group memberships of individual units are left unspecified, and their heterogeneity is influenced by group-specific unobservable factor structures. The model includes, as special cases, probit, logit, and Poisson regressions with interactive fixed effects along with unknown group membership. We discuss a computationally efficient estimation method and derive the corresponding asymptotic theory. Uniform consistency of the estimated group membership is established. To test heterogeneous regression coefficients within groups, we propose a Swamy-type test that allows for unobserved heterogeneity. We apply the proposed method to the study of market structure of the taxi industry in New York City. Our method unveils interesting and important insights from large-scale longitudinal data that consist of over 450 million data points.
{"title":"Large-Scale Generalized Linear Models for Longitudinal Data with Grouped Patterns of Unobserved Heterogeneity","authors":"T. Ando, Jushan Bai","doi":"10.1080/07350015.2022.2097913","DOIUrl":"https://doi.org/10.1080/07350015.2022.2097913","url":null,"abstract":"ABSTRACT This article provides methods for flexibly capturing unobservable heterogeneity from longitudinal data in the context of an exponential family of distributions. The group memberships of individual units are left unspecified, and their heterogeneity is influenced by group-specific unobservable factor structures. The model includes, as special cases, probit, logit, and Poisson regressions with interactive fixed effects along with unknown group membership. We discuss a computationally efficient estimation method and derive the corresponding asymptotic theory. Uniform consistency of the estimated group membership is established. To test heterogeneous regression coefficients within groups, we propose a Swamy-type test that allows for unobserved heterogeneity. We apply the proposed method to the study of market structure of the taxi industry in New York City. Our method unveils interesting and important insights from large-scale longitudinal data that consist of over 450 million data points.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"983 - 994"},"PeriodicalIF":3.0,"publicationDate":"2022-07-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48151446","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-06DOI: 10.1080/07350015.2022.2097911
Dongxiao Han, Jian Huang, Yuanyuan Lin, Lei Liu, Lianqiang Qu, Liuquan Sun
Abstract In this article, we propose a robust signal recovery method for high-dimensional linear log-contrast models, when the error distribution could be heavy-tailed and asymmetric. The proposed method is built on the Huber loss with penalization. We establish the and consistency for the resulting estimator. Under conditions analogous to the irrepresentability condition and the minimum signal strength condition, we prove that the signed support of the slope parameter vector can be recovered with high probability. The finite-sample behavior of the proposed method is evaluated through simulation studies, and applications to a GDP satisfaction dataset an HIV microbiome dataset are provided.
{"title":"Robust Signal Recovery for High-Dimensional Linear Log-Contrast Models with Compositional Covariates","authors":"Dongxiao Han, Jian Huang, Yuanyuan Lin, Lei Liu, Lianqiang Qu, Liuquan Sun","doi":"10.1080/07350015.2022.2097911","DOIUrl":"https://doi.org/10.1080/07350015.2022.2097911","url":null,"abstract":"Abstract In this article, we propose a robust signal recovery method for high-dimensional linear log-contrast models, when the error distribution could be heavy-tailed and asymmetric. The proposed method is built on the Huber loss with penalization. We establish the and consistency for the resulting estimator. Under conditions analogous to the irrepresentability condition and the minimum signal strength condition, we prove that the signed support of the slope parameter vector can be recovered with high probability. The finite-sample behavior of the proposed method is evaluated through simulation studies, and applications to a GDP satisfaction dataset an HIV microbiome dataset are provided.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"957 - 967"},"PeriodicalIF":3.0,"publicationDate":"2022-07-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49373682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-06-02DOI: 10.1080/07350015.2022.2085726
Shi Xu, Yao Zhen, Junhui Wang
ABSTRACT Communities in multi-layer networks consist of nodes with similar connectivity patterns across all layers. This article proposes a tensor-based community detection method in multi-layer networks, which leverages available node-wise covariates to improve community detection accuracy. This is motivated by the network homophily principle, which suggests that nodes with similar covariates tend to reside in the same community. To take advantage of the node-wise covariates, the proposed method augments the multi-layer network with an additional layer constructed from the node similarity matrix with proper scaling, and conducts a Tucker decomposition of the augmented multi-layer network, yielding the spectral embedding vector of each node for community detection. Asymptotic consistencies of the proposed method in terms of community detection are established, which are also supported by numerical experiments on various synthetic networks and two real-life multi-layer networks.
{"title":"Covariate-Assisted Community Detection in Multi-Layer Networks","authors":"Shi Xu, Yao Zhen, Junhui Wang","doi":"10.1080/07350015.2022.2085726","DOIUrl":"https://doi.org/10.1080/07350015.2022.2085726","url":null,"abstract":"ABSTRACT Communities in multi-layer networks consist of nodes with similar connectivity patterns across all layers. This article proposes a tensor-based community detection method in multi-layer networks, which leverages available node-wise covariates to improve community detection accuracy. This is motivated by the network homophily principle, which suggests that nodes with similar covariates tend to reside in the same community. To take advantage of the node-wise covariates, the proposed method augments the multi-layer network with an additional layer constructed from the node similarity matrix with proper scaling, and conducts a Tucker decomposition of the augmented multi-layer network, yielding the spectral embedding vector of each node for community detection. Asymptotic consistencies of the proposed method in terms of community detection are established, which are also supported by numerical experiments on various synthetic networks and two real-life multi-layer networks.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"915 - 926"},"PeriodicalIF":3.0,"publicationDate":"2022-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47121634","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-18DOI: 10.1080/07350015.2022.2076686
Yu-Ning Li, Degui Li, P. Fryzlewicz
ABSTRACT This article studies multiple structural breaks in large contemporaneous covariance matrices of high-dimensional time series satisfying an approximate factor model. The breaks in the second-order moment structure of the common components are due to sudden changes in either factor loadings or covariance of latent factors, requiring appropriate transformation of the factor models to facilitate estimation of the (transformed) common factors and factor loadings via the classical principal component analysis. With the estimated factors and idiosyncratic errors, an easy-to-implement CUSUM-based detection technique is introduced to consistently estimate the location and number of breaks and correctly identify whether they originate in the common or idiosyncratic error components. The algorithms of Wild Binary Segmentation for Covariance (WBS-Cov) and Wild Sparsified Binary Segmentation for Covariance (WSBS-Cov) are used to estimate breaks in the common and idiosyncratic error components, respectively. Under some technical conditions, the asymptotic properties of the proposed methodology are derived with near-optimal rates (up to a logarithmic factor) achieved for the estimated breaks. Monte Carlo simulation studies are conducted to examine the finite-sample performance of the developed method and its comparison with other existing approaches. We finally apply our method to study the contemporaneous covariance structure of daily returns of S&P 500 constituents and identify a few breaks including those occurring during the 2007–2008 financial crisis and the recent coronavirus (COVID-19) outbreak. An package “ ” is provided to implement the proposed algorithms.
{"title":"Detection of Multiple Structural Breaks in Large Covariance Matrices","authors":"Yu-Ning Li, Degui Li, P. Fryzlewicz","doi":"10.1080/07350015.2022.2076686","DOIUrl":"https://doi.org/10.1080/07350015.2022.2076686","url":null,"abstract":"ABSTRACT This article studies multiple structural breaks in large contemporaneous covariance matrices of high-dimensional time series satisfying an approximate factor model. The breaks in the second-order moment structure of the common components are due to sudden changes in either factor loadings or covariance of latent factors, requiring appropriate transformation of the factor models to facilitate estimation of the (transformed) common factors and factor loadings via the classical principal component analysis. With the estimated factors and idiosyncratic errors, an easy-to-implement CUSUM-based detection technique is introduced to consistently estimate the location and number of breaks and correctly identify whether they originate in the common or idiosyncratic error components. The algorithms of Wild Binary Segmentation for Covariance (WBS-Cov) and Wild Sparsified Binary Segmentation for Covariance (WSBS-Cov) are used to estimate breaks in the common and idiosyncratic error components, respectively. Under some technical conditions, the asymptotic properties of the proposed methodology are derived with near-optimal rates (up to a logarithmic factor) achieved for the estimated breaks. Monte Carlo simulation studies are conducted to examine the finite-sample performance of the developed method and its comparison with other existing approaches. We finally apply our method to study the contemporaneous covariance structure of daily returns of S&P 500 constituents and identify a few breaks including those occurring during the 2007–2008 financial crisis and the recent coronavirus (COVID-19) outbreak. An package “ ” is provided to implement the proposed algorithms.","PeriodicalId":50247,"journal":{"name":"Journal of Business & Economic Statistics","volume":"41 1","pages":"846 - 861"},"PeriodicalIF":3.0,"publicationDate":"2022-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45166385","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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