Download This PaperA Scree Plot Criterion for the Number of Factors
15 Pages Posted: 6 Jun 2022
Abstract
We propose a criterion to determine the number of factors in a datarich environment by comparing surfaces under the scree plot. Monte Carlo simulations shows that the finite-sample properties of our criterion outperform benchmarks in the dynamic factor model literature.
Keywords: factor model, number of factors, scree test
Suggested Citation: Suggested Citation
den Reijer, Ard and Otter, Pieter and Jacobs, Jan P.A.M., A Scree Plot Criterion for the Number of Factors. Available at SSRN: https://ssrn.com/abstract=4129079 or http://dx.doi.org/10.2139/ssrn.4129079
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