In later sections, we will show that the first principal component based only on the Dow and

Question:

In later sections, we will show that the first principal component based only on the Dow and S& P columns is calculated as PC1 = y1 = 0.707z1 + 0.707z2.
a. Use software to calculate PC1 and submit a time series plot of z1, z2, and PC1. All three series should be on one plot.
b. Describe the relationship between PC1 and the standardized stock market data.