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 =

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.

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a b PC1 is very close to Z1 and Z2 However PC1 ... View full answer

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