Optimal Combination of Arctic Sea Ice Extent Measures: A Dynamic Factor Modeling Approach

03/31/2020

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by   Francis X. Diebold, et al.

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The diminishing extent of Arctic sea ice is a key indicator of climate change as well as an accelerant for future global warming. Since 1978, Arctic sea ice has been measured using satellite-based microwave sensing; however, different measures of Arctic sea ice extent have been made available based on differing algorithmic transformations of the raw satellite data. We propose and estimate a dynamic factor model that combines four of these measures in an optimal way that accounts for their differing volatility and cross-correlations. From this model, we extract an optimal combined measure of Arctic sea ice extent using the Kalman smoother.