APPLICATION OF T-TECHNIQUE FACTOR ANALYSIS TO THE STOCK MARKET

Proportional changes in the prices of 425 individual common stocks were recorded for each of 44 quarter-year periods. After normalization of the data for each stock, sums of cross-products were computed among the time periods across stocks. Factor analysis of the cross-product matrix yielded seven factors. By cumulating the factor loadings successively over the 44 quarters, so as to simulate absolute values rather than change scores, six of these factors appear to be generated by the simplicial nature of the cross-product matrix, while the seventh was an expected factor representing general stock market strengths and weaknesses. Some possibilities for pre- diction are discussed, but little in the way of direct prediction of stock market fluctuations is supported by these findings.