infocrit | R Documentation |
This function performs model selection for the (2D) approximate factor model and returns the estimated number of factors.
infocrit(Y, method, r_max = 10)
Y |
A |
method |
A character string indicating which criteria to use. |
r_max |
An integer indicating the maximum number of factors allowed. 10 by default. |
"method" can be one of the following: "ICp2" and "BIC3" by Bai and Ng (2002), "ER" by Ahn and Horenstein (2013), "ED" by Onatski (2010).
The estimated number of factors.
Bai, J. and Ng, S., 2002. Determining the number of factors in approximate factor models. Econometrica, 70(1), pp.191-221.
Ahn, S.C. and Horenstein, A.R., 2013. Eigenvalue ratio test for the number of factors. Econometrica, 81(3), pp.1203-1227.
Onatski, A., 2010. Determining the number of factors from empirical distribution of eigenvalues. The Review of Economics and Statistics, 92(4), pp.1004-1016.
# simulate data
T <- 100
N <- 50
r <- 2
F <- matrix(stats::rnorm(T * r, 0, 1), nrow = T)
Lambda <- matrix(stats::rnorm(N * r, 0, 1), nrow = N)
err <- matrix(stats::rnorm(T * N, 0, 1), nrow = T)
Y <- F %*% t(Lambda) + err
# estimation
r_hat <- infocrit(Y, "BIC3", r_max = 10)
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