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seen Feb 14 '13 at 15:57

Feb
13
comment Interpretation of PCs
Thanks so much for taking the time to reply to me. I will read the papers and see if I'm missing something.
Feb
13
comment Interpretation of PCs
thanks for the link. As I said earlier Im using pca on crude oil futures. I need to use pca to come up with theoretical price of each contract adjusted for factor1 and factor2. Any thoughts on how to use pca in that way? Appreciate all your help.
Feb
13
comment Interpretation of PCs
Crude. Im not really sure what the deviation is going to look like since Im not sure how to get the theo price...
Feb
13
comment Interpretation of PCs
Thanks Richard. You are right, I used standardized log returns and then picked 2 biggest components. How can I use those pcs to adjust current contract’s price to theoretical? Thanks.
Feb
13
comment Interpretation of PCs
Thanks for your reply. The links are great. From what I understand, I can overlay the orig. log return matrix with found components and get a new matrix of log returns of contracts in terms of components. But I don’t really want to know how the contracts’ log returns looked like in the past in terms of 2 new PCs. I would like to know how to adjust current price of the future using the 2 PCs I found for each contract to get my theoretical price for each contract. In futures, pc1 is shift (the same sign) and pc2 is slope and I need to adjust current price to reflect those. Thanks again!!
Feb
13
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Feb
13
revised Interpretation of PCs
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Feb
12
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