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A nonlinear principal component decomposition

Author

Listed:
  • Florian Gunsilius

    (Institute for Fiscal Studies and MIT)

  • Susanne M. Schennach

    (Institute for Fiscal Studies and Brown University)

Abstract

The idea of summarizing the information contained in a large number of variables by a small number of "factors" or "principal components" has been widely adopted in economics and statistics. This paper introduces a generalization of the widely used principal component analysis (PCA) to nonlinear settings, thus providing a new tool for dimension reduction and exploratory data analysis or representation. The distinguishing features of the method include (i) the ability to always deliver truly independent factors (as opposed to the merely uncorrelated factors of PCA); (ii) the reliance on the theory of optimal transport and Brenier maps to obtain a robust and ef?cient computational algorithm and (iii) the use of a new multivariate additive entropy decomposition to determine the principal nonlinear components that capture most of the information content of the data.

Suggested Citation

  • Florian Gunsilius & Susanne M. Schennach, 2017. "A nonlinear principal component decomposition," CeMMAP working papers CWP16/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:16/17
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    References listed on IDEAS

    as
    1. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
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    5. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
    6. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
    7. Alfred Galichon, 2016. "Optimal Transport Methods in Economics," Economics Books, Princeton University Press, edition 1, number 10870.
    8. Alfred Galichon, 2016. "Optimal transport methods in economics," SciencePo Working papers hal-03256830, HAL.
    9. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Principal Component Analysis; Nonlinear Principal Components; Factor Models;
    All these keywords.

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