8/6/2019 Spl Lecture Asgn

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Assignment on PCA

Complete the following assignment and discuss in the class on Wednesday.

(I) Choose any six stocks from www.nseindia.com

Please make your choice of firms in such a way that three belong to one industry and theother three to another industry. For example the first three stocks could be software

companies and the next three could be pharmaceutical companies.

1. Perform the PCA on this data. The results should include information about eigen

values, eigen vectors, the principal components, the proportion of correlation explained

by each of the components, screeplot and the inference associated with the first eigen

value and eigen vectors.

2. (a) What is your interpretation of the principal components? (b) Can the data besummarised into three or less components? How will you assess this?

Repeat the exercise using the covariance matrix (S). Note that in STATA the default is

using correlation matrix (R) is being computed in the previous problem.

3. Does it make any difference which matrix is chosen for analysis?

http://www.nseindia.com/http://www.nseindia.com/