Dynamic factor and VARMA models: equivalent representations, dimension reduction and nonlinear matrix equations

2023/07/19 by Shankar Bhamidi, Bhamidi, Shankar, Dhruv Patel +3
Chemistry · #65F45 #FOS: Computer and information sciences #Methodology (stat.ME) #Molecular spectroscopy and chirality #Primary: 62M10. Secondary: 15A24

paper · pdf · doi:10.48550/arxiv.2307.09974

openalex publication_date 2023/07/19 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01

Abstract

A dynamic factor model with factor series following a VAR(p) model is shown to have a VARMA(p,p) model representation. Reduced-rank structures are identified for the VAR and VMA components of the resulting VARMA model. It is also shown how the VMA component parameters can be computed numerically from the original model parameters via the innovations algorithm, and connections of this approach to non-linear matrix equations are made. Some VAR models related to the resulting VARMA model are also discussed.

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