calcRealWorldFactor​Scores

Takes output from factoran and turns into real world explained returns and residuals.

This function extends the factor analysis tool box function factoran.

Once you have produced a factor analysis you then may want work out what the explained, and unexplained parts of the data were- in real world space, rather than some transformed space. It would be nice if this was included in the factoran function but hey ho.

Written Martyn Dorey 20 Aug 2004

Takes output from the factor analysis function factoran and translates it into realworld obervations:

Lets say you've got a matrix or returns in mxAssets, 1)Produce some factor analysis using the MATLAB function:

[mxLoadings,vecIdio,T,stats,mxFactorScores] = factoran(mxAssets);

2)Now split the returns into two parts, that which is explained and the residual.

[mxScoresRealWorld,mxDiv,mxExpX,mxResid,Stats] = calcFactorScores(mxLoadings,mxAssets,vecIdio,T)

I've also included a function that takes simulations of factor distributions and pumps it into real world asset expectations.

Any comments or bugs please send me a message.
Regards
M.