Sample sufficiency for principle component analysis in real property valuation

Abstract

Multivariate analysis methods are used to reduce the dimensionality of the vast data available. In this process, the size of available sample happens to be a great deal of concern. Principle Component Analysis (PCA) method has been implemented in various fields including psychology, sociology, economics, engineering and so on. Recommendations made in the literature about the sample adequacy vary and are found to depend upon the study area under consideration. Very less reported work of implementation of PCA to real property valuation has been found so far. Naturally, sample sufficiency for applying PCA to real property valuation has not been studied in detail in the available literature. With no previous assessment of sample requirement, stability of outcomes of PCA applied to real property valuation is checked based on varying sample size. Comparison with the standards mentioned in literature is also done to validate the results of sample sufficiency for application of PCA to ascertain factors affecting real property valuation.