Estimating the number of factors to include in a high-dimensional multivariate bilinear model

Abstract

We present two new statistics for estimating the number of factors underlying in a multivariate system. One of the two new methods, the original NUMFACT, has been used in high profile environmental studies. The two new methods are first explained from a geometrical viewpoint. We then present an algebraic development and asymptotic cutoff points. Next we present a simulation study that shows that for skewed data the new methods are typically superior to traditional methods and for normally distributed data the new methods are competitive to the best of the traditional methods. We finally show how the methods compare by using two environmental data sets.

Keywords:

• correlation matrix
• resampling
• eigenvectors
• eigenvalues
• Numfact