Tuesday, October 20, 2020

Factor Loadings and Network Connectedness

I have long been interested in using time-varying latent factor loadings for time-varying connectedness measurement. Patrick Gagliardini made great progress on time-varying loadings in his October 19 SoFiE talk, discussed by Seth Pruitt (recording etc, here).  

I want to relate time-varying latent factor loadings to the Diebold-Yilmaz connectedness measurement framework. Kelly et al. (2019) helps, showing how to empirically assess the correlation, if any, between time-varying factor loadings and time-varying DY network connectedness, by allowing loadings to depend on covariates like connectedness.

But what I really want is a "Rosetta Stone" giving a 1-1 translation between Patrick's "time-varying factor loadings" world and the DY "time varying network centrality" world. That's almost surely wishful thinking in general, but maybe under some (stringent) conditions?

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