Frontier Advanced Seminar Series in Economics No. 17

Estimation of Characteristics-based Quantile Factor Models

Speaker: Prof. Liang CHEN (Peking University)

Host: Prof. Anzhou ZHANG (Liaoning University)

Introducer: Prof. Haiming MAO (Liaoning University)

Time: March 24, 2023 (Friday), 14:00-15:30 (UTC +08:00)

Venue: Conference Room on the base floor of Wuzhou Garden, Chongshan Campus, Liaoning University

Online Venue: Tencent Meeting (Meeting ID: 3007551 6895)

Language: Mandarin/English

Abstract：This paper studies the estimation of characteristic-based quantile factor models where the factor loadings are unknown functions of observed individual characteristics while the idiosyncratic error terms are subject to conditional quantile restrictions. We propose a three stage estimation procedure that is easily implementable in practice and has nice properties. The convergence rates, the limiting distributions of the estimated factors and loading functions, and a consistent selection criterion for the number of factors at each quantile are derived under general conditions. The proposed estimation methodology is shown to work satisfactorily when: (i) the idiosyncratic errors have heavy tails, (ii) the time dimension of the panel dataset is not large, and (iii) the number of factors exceeds the number of characteristics. Finite sample simulations and an empirical application aimed at estimating the loading functions of the daily returns of a large panel of S&P500 index securities help illustrate these properties.

Speaker Introduction: Liang CHEN is an Assistant Professor at HSBC Business School, Peking University. He obtained his Ph.D. degree from University Carlos III at Madrid. His primary research interests are theoretical and applied econometrics. His research has been published in Econometrica, the Journal of Econometrics, Econometric Theory, the Econometrics Journal, and Economics Letters.