Econometrics Seminar - Melanie Schienle (KIT)
| Dates: | 8 April 2024 |
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| Times: | 12:00 - 13:00 |
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| What is it: | Seminar |
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| Organiser: | School of Social Sciences |
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Title: Consistent model determination of ultra-high dimensional cointegrated time series (with Shi Chen)
Abstract: This paper proposes a method for model determination in ultra-high dimensional cointegrated systems where the cross-section dimension m can even largely exceed the sample size T. For such ultra-high dimensional cases, we require an adequate non-standard pre-screening step which we develop for the nonstationary cointegra- tion vector but also for the stationary loading matrix. We prove that identified sets for the non-zero loadings and the cointegration space contain the respective true sets with high probability. A feasible algorithm is provided, making the technique easily accessible for practitioners. In a second step, we employ reduced rank regression based on the pre-selected set of variables and show the cointegration rank selection consistency of the overall procedure. To achieve consistent rank selection, we propose a tailored information criterion which is also of general interest for factor models when both strong and weak factors are present. Results of the simulation study demonstrate competitive performance of the proposed methodology. In empirical illustrations with 1045 NASDAQ stocks and with the ITraXX constituents, the proposed methodology allows for large-scale multivariate predictive regression for the entire system.
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ALB Boardroom
Arthur Lewis Building
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