RT Generic
T1 Spurious relationships in high dimensional systems with strong or mild persistence
A1 Gonzalo, Jesús
A1 Pitarakis, Jean-Yves
A2 Universidad Carlos III de Madrid. Departamento de Economía, 
AB This paper is concerned with the interactions of persistence and dimensionality in the context of the eigenvalue estimation problem of large covariance matrices arising in cointegration and principal component analysis. Following a review of the early and more recent developments in this area we investigate the behaviour of these eigenvalues in a VAR setting that blends pure unit root, local to unit root and mildly integrated components. Our results highlight the seriousness of spurious relationships that may arise in such Big Data environments even when the degree of persistence of variables involved is mild and is affecting only a small proportion of a large data matrix with important implications for forecasts based on principal component regressions and related methods. We argue that first differencing prior to principal component analysis may be suitable even in stationary ornearly-stationary environments.
SN 2340-5031
YR 2020
FD 2020-12-09
LK https://hdl.handle.net/10016/31553
UL https://hdl.handle.net/10016/31553
LA eng
DS e-Archivo
RD 2 may. 2024