arXiv subjects

Patrick Gagliardini

Publications and source records attributed to Patrick Gagliardini.

4 recordsLinked to original sources

arXiv2025

Latent Factor Analysis in Short Panels

We develop a pseudo maximum likelihood method for latent factor analysis in short panels without imposing sphericity nor Gaussianity. We derive an asymptotically uniformly most powerful invariant test for the number of factors. On a large panel of monthly U.S. stock returns, we separate month after month systematic and idiosyncratic risks in short subperiods of bear vs. bull market. We observe an uptrend in the paths of total and idiosyncratic volatilities. The systematic risk explains a large part of the cross-sectional total variance in bear markets but is not driven by a single factor and not spanned by observed factors.

econ.EM↗

arXiv2022

Eigenvalue tests for the number of latent factors in short panels

This paper studies new tests for the number of latent factors in a large cross-sectional factor model with small time dimension. These tests are based on the eigenvalues of variance-covariance matrices of (possibly weighted) asset returns, and rely on either the assumption of spherical errors, or instrumental variables for factor betas. We establish the asymptotic distributional results using expansion theorems based on perturbation theory for symmetric matrices. Our framework accommodates semi-strong factors in the systematic components. We propose a novel statistical test for weak factors against strong or semi-strong factors. We provide an empirical application to US equity data. Evidence for a different number of latent factors according to market downturns and market upturns, is statistically ambiguous in the considered subperiods. In particular, our results contradicts the common wisdom of a single factor model in bear markets.

econ.EM↗

arXiv2017

A diagnostic criterion for approximate factor structure

We build a simple diagnostic criterion for approximate factor structure in large cross-sectional equity datasets. Given a model for asset returns with observable factors, the criterion checks whether the error terms are weakly cross-sectionally correlated or share at least one unobservable common factor. It only requires computing the largest eigenvalue of the empirical cross-sectional covariance matrix of the residuals of a large unbalanced panel. A general version of this criterion allows us to determine the number of omitted common factors. The panel data model accommodates both time-invariant and time-varying factor structures. The theory applies to random coefficient panel models with interactive fixed effects under large cross-section and time-series dimensions. The empirical analysis runs on monthly and quarterly returns for about ten thousand US stocks from January 1968 to December 2011 for several time-invariant and time-varying specifications. For monthly returns, we can choose either among time-invariant specifications with at least four financial factors, or a scaled three-factor specification. For quarterly returns, we cannot select macroeconomic models without the market factor.

q-fin.ST↗

arXiv1998

Generalization of the Luttinger Theorem for Fermionic Ladder Systems

We apply a generalized version of the Lieb-Schultz-Mattis Theorem to fermionic ladder systems to show the existence of a low-lying excited state (except for some special fillings). This can be regarded as a non-perturbative proof for the conservation under interaction of the sum of the Fermi wave vectors of the individual channels, corresponding to a generalized version of the Luttinger Theorem to fermionic ladder systems. We conclude by noticing that the Lieb-Schultz-Mattis Theorem is not applicable in this form to show the existence of low-lying excitations in the limit that the number of legs goes to infinity, e.g. in the limit of a 2D plane.

cond-mat.str-el↗