Principal Component Analysis - Statistical Method of Territorial Profile Factor Analysis

Abstract

The purpose of factor analysis is to select from a large number of random variables, a reduced number of factors which provide the possibility to more exactly and more complexly establish the interdependences. The principal component analysis is based on a rigorous mathematical instrument, which does not take into consideration any of the arbitrary elements or subjective decisions. The principal component analysis has to determine the eigen dominant valuation - method known under the name of "Hotelling's deflator method", where to find out the eigen values means to determine the joint factors.

Keywords: factor analysis, principal component analysis, dominant eigen value, Hotelling's deflator method

JEL Classification: C10