Applying Independent Component Analysis to Factor Model in Finance

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.

• Type: Conference
• Year: 2000
• Where: IDEAL
• Authors: Siu-Ming Cha, Lai-Wan Chan
• Keywords: Blind Source Separation, Factor Model, IDEAL 2000, Intelligent Agents, Popular Model