Applying Independent Component Analysis to Factor Model in Finance

Authors:
Siu-Ming Cha;Lai-Wan Chan
Affiliations:
-;-
Venue:
IDEAL '00 Proceedings of the Second International Conference on Intelligent Data Engineering and Automated Learning, Data Mining, Financial Engineering, and Intelligent Agents
Year:
2000

Citing 7
Cited 0

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Abstract

Factor model is a very useful and popular model in finance. In this paper, we show the relation between factor model and blind source separation, and we propose to use Independent Component Analysis (ICA) as a data mining tool to construct the underlying factors and hence obtain the corresponding sensitivities for the factor model.