Wikipedia
Dynamic factor
In econometrics, a dynamic factor (also known as a diffusion index) is a series which measures the co-movement of many time series. It is used in certain macroeconomic models.
Formally
X = ΛF + e,
where F = (f, …, f) is the vector of lagged factors of the variables in the T × N matrix X (T is the number of observations and N is the number of variables), Λ are the factor loadings, and e is the factor error.