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              Department of Systems Engineering and Engineering Management

                             The Chinese University of Hong Kong

 

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Title:  Large Dimensional Factor Modeling Based on High-Frequency Observations 

 

 

Speaker:  Markus Pelger, Stanford University 

 

 

Abstract:

This paper develops a statistical theory to estimate an unknown factor structure based on financial high-frequency data. I derive a new estimator for the number of factors and derive consistent and asymptotically mixed-normal estimators of the loadings and factors under the assumption of a large number of cross-sectional and high-frequency observations. The estimation approach can separate factors for normal "continuous" and rare jump risk. The estimators for the loadings and factors are based on the principal component analysis of the quadratic covariation matrix. The estimator for the number of factors uses a perturbed eigenvalue ratio statistic. The results are obtained under general conditions, that allow for a very rich class of stochastic processes and for serial and cross-sectional correlation in the idiosyncratic components.

 

 

Bio:

Markus Pelger is an Assistant Professor at the Management Science & Engineering Department at Stanford University and a Reid and Polly Anderson Faculty Fellow at Stanford University. His research interests are in statistics, financial econometrics, asset pricing and risk management. His work includes contributions in statistical factor analysis, high-frequency statistics, credit risk modeling and management compensation. He is particularly interested in how systematic risk factors and tail risk in the form of jumps influence the price of assets and the incentives of agents. For this purpose he has developed various statistical tools to estimate unknown risk factors from large dimensional data sets and from high-frequency data. He uses them empirically to predict asset prices and construct trading strategies. Markus received his Ph.D. in Economics from the University of California, Berkeley. He has a Diplom in Mathematics and a Diplom in Economics from the University of Bonn in Germany.

 

 

This seminar is hosted by Prof. Nan Chen.

 

 

Venue: Room 513,

      William M.W. Mong Engineering Building (ERB),

      (Engineering Building Complex Phase 2)

      The Chinese University of Hong Kong.