Factor analysis

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Factor analysis

A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.

Factor Analysis

The analysis of seemingly unrelated phenomena and their disparate and combined effect on an investment. Factor analysis takes a large number of dependent variables and seeks to isolate the independent variables determining them. Isolating the independent variables (called factors in this context) helps reduce the number of variables that the analyst must study in order to make accurate statements and predictions about the direction of an investment.