Discriminant Analysis, Factor Analysis, and Principal Component Analysis: Theory, Method, and Applications

Cheng Few Lee

Chapter 77 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 2599-2633 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we first discuss the basic concepts of linear algebra and linear combination and its distribution. Then we discuss the concepts of vectors, matrices, and their operations. Linear-equation system and its solution are also explored in detail. Based upon this information, we discuss discriminant analysis, factor analysis, and principal component analysis. Some applications of these three analyses are also demonstrated.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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