Main Effect Factor Models in High-Dimensional Matrix Time Series: Identification and Sparsity

Abstract

We propose a general identification framework for main effect factor models for matrix-valued time series. The classical sum-to-zero restriction on the row and column main effects is replaced by a broad class of shift-varying functions, which includes weighted averages, quantiles, and reference-unit anchors as special cases. We prove that the shift-varying property is necessary and sufficient for parameter identification, and we derive closed-form estimators under minimal assumptions. Asymptotic convergence rates of all estimated components are derived under weak, heterogeneous factor strengths. Building on this flexible identification, we address sparsity in the main effects by selecting a minimum-based shift-varying function that sets the smallest main effect to zero, and we introduce a doubly adaptive fused Lasso estimator that consistently recovers the true sparse and dense blocks. A modified Mallows's statistic is developed for tuning parameter selection, and the entire procedure is computationally practical via an equivalent generalized lasso formulation. Simulation experiments are performed under a variety of settings, showing our proposed methods work well. Two real applications on employment growth and economic indices are demonstrated to illustrate the empirical value of our approach.