Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/64671 
Year of Publication: 
2009
Series/Report no.: 
cemmap working paper No. CWP07/09
Publisher: 
Centre for Microdata Methods and Practice (cemmap), London
Abstract: 
We investigate a method for extracting nonlinear principal components. These principal components maximize variation subject to smoothness and orthogonality constraints; but we allow for a general class of constraints and densities, including densities without compact support and even densities with algebraic tails. We provide primitive sufficient conditions for the existence of these principal components. We also characterize the limiting behavior of the associated eigenvalues, the objects used to quantify the incremental importance of the principal components. By exploiting the theory of continuous-time, reversible Markov processes, we give a different interpretation of the principal components and the smoothness constraints. When the diffusion matrix is used to enforce smoothness, the principal components maximize long-run variation relative to the overall variation subject to orthogonality constraints. Moreover, the principal components behave as scalar autoregressions with heteroskedastic innovations. Finally, we explore implications for a more general class of stationary, multivariate diffusion processes.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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