Identifying_Dimension

Determining the number of factors

Methods

• Ratio of Explained Variance (EV)
• Eigen Ratio (ER): Lam, C. and Yao, Q., 2012
• Growth Ratio (GR): Ahn and Horenstein 2013
• Contribution Ratio (CR): Xia, Liang, et.al 2018
• Information Criteria (IC): Cho, H. et al. 2016

References

• Lam, C. and Yao, Q. (2012) ‘Factor modeling for high-dimensional time series: Inference for the number of factors’, Annals of Statistics, 40(2), pp. 694–726. doi: 10.1214/12-AOS970.
• Onatski, A. et al. (2013) ‘Eigenvalue Ratio Test for the Number of Factors’, Econometrica, 81(3), pp. 1203–1227. doi: 10.3982/ECTA8968.
• Xia, Q., Xu, W. and Zhu, L. (2015) ‘Consistently determining the number of factors in multivariate volatility modelling’, Statistica Sinica, 25(3), pp. 1025–1044. Available at: https://www.jstor.org/stable/24721219.
• Cho, H. et al. (2016) ‘Modelling and forecasting daily electricity load curves: a hybrid approach’, Journal of the American Statistical Association, 108(501), pp. 7–21. doi: 10.1080/01621459.2012.722900.