Weak Identification in Low-Dimensional Factor Models with One or Two Factors
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arXiv
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| Natura: | Preprint |
| Pubblicazione: |
2022
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| _version_ | 1866917606230851584 |
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| author | Cox, Gregory |
| author_facet | Cox, Gregory |
| contents | This paper describes how to reparameterize low-dimensional factor models with one or two factors to fit weak identification theory developed for generalized method of moments models. Some identification-robust tests, here called "plug-in" tests, require a reparameterization to distinguish weakly identified parameters from strongly identified parameters. The reparameterizations in this paper make plug-in tests available for subvector hypotheses in low-dimensional factor models with one or two factors. Simulations show that the plug-in tests are less conservative than identification-robust tests that use the original parameterization. An empirical application to a factor model of parental investments in children is included. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2211_00329 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | Weak Identification in Low-Dimensional Factor Models with One or Two Factors Cox, Gregory Econometrics This paper describes how to reparameterize low-dimensional factor models with one or two factors to fit weak identification theory developed for generalized method of moments models. Some identification-robust tests, here called "plug-in" tests, require a reparameterization to distinguish weakly identified parameters from strongly identified parameters. The reparameterizations in this paper make plug-in tests available for subvector hypotheses in low-dimensional factor models with one or two factors. Simulations show that the plug-in tests are less conservative than identification-robust tests that use the original parameterization. An empirical application to a factor model of parental investments in children is included. |
| title | Weak Identification in Low-Dimensional Factor Models with One or Two Factors |
| topic | Econometrics |
| url | https://arxiv.org/abs/2211.00329 |