Under weak factor loadings, PCA and regularization-based forecasts are all consistent for the conditional mean, but ridge and random projections converge more slowly than PCA when the time dimension is small relative to the cross-section dimension.
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Diffusion index forecasts under weaker loadings: PCA, ridge regression, and random projections
Under weak factor loadings, PCA and regularization-based forecasts are all consistent for the conditional mean, but ridge and random projections converge more slowly than PCA when the time dimension is small relative to the cross-section dimension.