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Jeudi 08 Septembre

Dan BEN-MOSCHE (The Hebrew University of Jerusalem)

"Identification and Estimation of Coefficients in Dependent Factor Models"

Ces séminaires ont lieu les jeudis de 14 h à 15 h 30 en Salle S016 à l'INSEE-CREST : 15 Boulevard Gabriel Péri, 92245 MALAKOFF (Métro : Malakoff/Plateau de Vanves ).

Abstract :

We identify and estimate coefficients in a linear factor model in which factors are allowed to be arbitrarily dependent. Given a statistical dependence structure on the unobservables, rank conditions on the matrix representation and restrictions on coefficients, the unknown coefficients are identified under nonnormality assumptions. The identification strategy transforms the system of equations into a functional equation using log characteristic functions. By ruling out polynomial functions which correspond to normal distributions, we show that the unknown coefficients uniquely solve the functional equation. Identification is illustrated in the classical errors-in-variables model with arbitrarily dependent unobserved regressors and in a panel data moving average process in which subsets of the shocks are allowed to be arbitrarily dependent. We propose an extremum estimator based on second-order partial derivatives of the empirical log characteristic function that is root-n consistent and asymptotically normal. In Monte Carlo simulations the estimator produces similar results to a GMM estimator based on higher-order moments, and is more robust to different amounts of measurement error and distributional choices of unobservables.