title: Equivalent Dynamic Models.
abstract: Equivalences of two classes of dynamic models for weakly stationary multivariate time series are discussed: dynamic factor models and autoregressive models. It is shown that exploratory dynamic factor models can be rotated, yielding an infinite set of equivalent solutions for any observed series. It also is shown that dynamic factor models with lagged factor loadings are not equivalent to the currently popular state-space models, and that restriction of attention to the latter type of models may yield invalid results. The known equivalent vector autoregressive model types, standard and structural, are given a new interpretation in which they are conceived of as the extremes of an innovating type of hybrid vector autoregressive models. It is shown that consideration of hybrid models solves many problems, in particular with Granger causality testing.
authors.affiliation: a The Pennsylvania State University.
authors.forename: Peter C M
authors.initials: PCM
authors.lastname: Molenaar
mesh_terms: D000293:Adolescent; D000465:Algorithms; D001921:Brain / Q000502:physiology; D003627:Data Interpretation, Statistical; D004569:Electroencephalography; D005163:Factor Analysis, Statistical; D006339:Heart Rate / Q000502:physiology; D006801:Humans; D007231:Infant, Newborn; D015233:Models, Statistical; D015999:Multivariate Analysis; D017711:Nonlinear Dynamics; D012044:Regression Analysis; D012119:Respiration; D012815:Signal Processing, Computer-Assisted; D013997:Time Factors
keywords: Dynamic factor analysis; Granger causality; hybrid models; lagged factor loadings; matrix polynomials; state-space models; vector autoregressive models