Arbeitspapier
A unique orthogonal variance decomposition
Let e and Σ be respectively the vector of shocks and its variance covariance matrix in a linear system of equations in reduced form. This article shows that a unique orthogonal variance decomposition can be obtained if we impose a restriction that maximizes the trace of A, a positive definite matrix such that Az = e where z is vector of uncorrelated shocks with unit variance. Such a restriction is meaningful in that it associates the largest possible weight for each element in e with its corresponding element in z. It turns out that A = Σ[...] , the square root of Σ.
- Language
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Englisch
- Bibliographic citation
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Series: Cardiff Economics Working Papers ; No. E2008/10
- Classification
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Wirtschaft
Econometrics
- Subject
-
Variance decomposition
Cholesky decomposition
unique orthogonal decomposition and square root matrix
Varianzanalyse
Statistische Methode
- Event
-
Geistige Schöpfung
- (who)
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Wong, Woon K.
- Event
-
Veröffentlichung
- (who)
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Cardiff University, Cardiff Business School
- (where)
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Cardiff
- (when)
-
2008
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Wong, Woon K.
- Cardiff University, Cardiff Business School
Time of origin
- 2008
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