Factor Analysis and HAR-RV ECON 201FS Factor Analysis and HAR-RV Zed Lamba 4/7/08

Recap of Factor Analysis Results ECON 201FS Recap of Factor Analysis Results Daily RV of all 10 tech stocks (CSCO, DELL, EMC, HPQ, IBM, INTC, MSFT, ORCL, TXN, XRX) had high communality and was well-explained by 1 common factor It was suggested that a factor analysis be conducted on their logs, as that is a smoother function that doesn’t blow up

Factor Analysis on ln(RV) I ECON 201FS Factor Analysis on ln(RV) I

Factor Analysis on ln(RV) II ECON 201FS Factor Analysis on ln(RV) II Average uniqueness decreases from 0.3510 to 0.2374! Similarly, conducting factor analysis on ln(Bipower Variation) decreases average uniqueness from 0.3625 to 0.2526! Will try to include market in analysis on Wed.

HAR-RV I Note that R-squared is quite high ECON 201FS HAR-RV I Note that R-squared is quite high Hopefully coming on Wednesday – including the market into the regression, so industry and market effects can be separated

ECON 201FS HAR-RV II DELLRVL1 appears to be significant, the same as in regular time-lagged regressions done previously

Significance Test – 1 day lags ECON 201FS Significance Test – 1 day lags

Significance Test – 5 day average lags ECON 201FS Significance Test – 5 day average lags

Significance Test – 22 day average lags ECON 201FS Significance Test – 22 day average lags Will separate out by company for next time