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Dynamic Hierarchical Factor Model

Application in Marketing:

UNDER THE PRESSURE OF A PRICE WAR, HOW DOES BRANDS’ PRICE

PROMOTION ADJUST ACCORDINGLY

Student: Yuxuan Yang

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ECONOMETRIC MODEL

DYNAMIC HIERARCIAL FACTOR MODEL

(DHFM)

MODEL (FAVAR)

FACTOR AUGMENTED VECTOR AUTOREGRESSIVE

List of Brands and Hierarchical Classification

Level 4 Level 3 Level 2 Level 1(Z)

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Main Findings (2)

PRICE PROMOTION FORECASTING

SALES PREDICTION THROUGH FAVAR

The overall sales prediction is satisfying. Higher the

level, better the predictions.

Whereas, the FAVAR’s prediction performance does

not significantly better than the benchmark model,

compared with APE and ASPE.

the DHFM is not capable of predicting the price

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