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Using PCA in Financial Markets Field
Keywords
PCA, multivariate, financial market, quantitative
Abstract
Principal Component Analysis is a multivariate technique which aims the reduction of the initially causal space, with a minimal loss of the variance. Using this technique I identified a very interesting aspect, subsequently confirmed too by specific methods of discriminant analysis. If before the financial crisis, companies differentiate themselves primarily by rates of profitability, now it’s obvious the increasing discriminatory power of liquidity and efficiency rates. We can also see that most companies register values under the standard parameters considered, even for a period of crisis.
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