Unstable Diffusion Indexes: With an Application to Bond Risk Premia
研究了因子模型和因子增强回归在存在结构不稳定性时的估计与推断问题，提出了断点检验，并发现债券风险溢价与宏观经济因素之间的关系存在不稳定性。
Abstract This paper studies the empirically relevant problem of estimation and inference in diffusion index forecasting models with structural instability. Factor model and factor augmented regression both experience a structural change with different unknown break dates. In the factor model, we estimate factors and loadings by principal components. We consider least squares estimation of the factor augmented regression and propose a break test. The empirical application uncovers instabilities in the linkages between bond risk premia and macroeconomic factors.