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

2. 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

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

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

5. 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

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

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

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

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