Principal components analysis

Updated: Aug 20, 2021

A technique based on the linear transformation of a multivariable data set into a smaller set of uncorrelated variables, called principal components. The first principal component accounts for as much of the variability in the data as possible, and each succeeding component accounts for as much of the remaining variability as possible. The method does not identify what these components are; this has to be inferred from outside knowledge about the processes behind the data.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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