negative Principal components values

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Alfred
Posts: 7
Joined: Fri Mar 06, 2009 4:13 pm

negative Principal components values

Postby Alfred » Sat Jul 06, 2013 1:43 am

Dear Carol,

I wrote a program to calculate the principal components recently. But I found that some values in the principal components are negative.
I check the detail of the eigenvector. I found that some of elements of the eigenvector are negative . so the principal components has
some negative value. I use stock data and yield data (this part is from your spot curve in the cd-rom) to test it. Is it possible to occur
negative value in real case ? Or I migh be wrong somewhere ?
Thanks a lot.

regards,
Alfred Wu

Alfred
Posts: 7
Joined: Fri Mar 06, 2009 4:13 pm

Re: negative Principal components values

Postby Alfred » Thu Jan 02, 2014 1:22 pm

Dear Carol,

I think that I got one application in principal component. Recently, I wrote an program to test O-GARCH.
I found that if we can select proper principal component K, we can reduce the dimension of matrix and
get proper result. But as you mention, the reduction in yield is better than stock. My portfolio could
cotain treasury product and stock. I can find the reduction effect is different. if the portfolio only contain
treasury product( I mean the risk factors only consist of yield), the reduction effect is significant. If
the portoflio conaint treasury products and stocks, future, option. In order to get the similiar result,
the reduction effect might not be so well. At least, I know one application how to apply principal components
Reading your books needs more efforts, but can get much more than the reader expects.
Thanks a lot.

regards,
Alfred Wu


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