Matrix algebra

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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A branch of mathematics which defines rules by which matrices may be added, subtracted, multiplied and divided. It is also concerned with analysing the properties of particular types of matrices and of particular types of expression involving matrices. Though initially a purely abstract branch of mathematics, it has found considerable application in economics and econometrics, because many of the models which they use have a mathematical structure which pecmits representation by matrices. lndeed, such is the power and relative simplicity of matrix algebra that matrix-based models are often applied to a problem even though it is known that they are not strictly appropriate, it being argued that the degree of insight achieved more than makes up for the fact that answers will only be approximate.

Reference: The Penguin Dictionary of Economics, 3rd edt.