PLS factor extraction (Matlab-faithful NIPALS algorithm)

Usage

pls_est(target, X, nfac)

Arguments

target: Numeric matrix (T x N) of target variables (e.g., asset returns). A vector is coerced to a T x 1 matrix.
X: Numeric matrix or data frame (T x L) of factor proxies.
nfac: Positive integer; number of PLS components to extract.

Value

An object of class "sdim_fit".

References

He, J., Huang, J., Li, F., and Zhou, G. (2023). Shrinking Factor Dimension: A Reduced-Rank Approach. Management Science, 69(9). doi:10.1287/mnsc.2022.4563

Examples

set.seed(1)
X <- matrix(rnorm(100 * 8), 100, 8)
Y <- matrix(rnorm(100 * 5), 100, 5)
fit <- pls_est(target = Y, X = X, nfac = 3)
print(fit)
#> <sdim_fit [pls]>
#>  Observations : 100 
#>  Predictors   : 8 
#>  Factors      : 3