I would appreciate if someone could correct me if i am wrong in my suggestion. I am using PCA to : find measure of cointegration between selected assets find the eigenvector and its portfolio with ...
Why is the first principal component a proxy for the market portfolio, and what other proxies exist?
Let's say that I have a universe of stocks from a certain sector. I want to compute the market portfolio of this sector. Beta is the covariance between each stock and the market. But how do you ...