The principal components of a vector of random variables are related to the common factors of a factor analysis model for this vector. Conditions are presented under which components and factors as well as factor proxies come close to each other. A similar analysis is carried out for the matrices of loadings of principal components and factor analysis.
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Volume (Year): 55 (1995) Issue (Month): 1 (October) Pages: 105-124 Download reference. The following formats are available: HTML
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James H. Stock & Mark W. Watson, 1998.
"Diffusion Indexes,"
NBER Working Papers
6702, National Bureau of Economic Research, Inc.
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