Statistical technique that can uncover relationship patterns underlying hundreds of interacting phenomenon such as changes in interest rates, inflation, and/or oil prices. Used in fields as diverse as horse racing and financial markets, factor analysis is used to analyze large numbers of dependent variables to detect certain aspects of the independent variables (called factors) affecting those dependent variables - without directly analyzing the independent variables. It enables an analyst to reduce the number of elements to be studied and to observe how they are interlinked. Factor analysis techniques are used in constructing factor models.

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