Finite mixture models can adequately model population heterogeneity when this heterogeneity arises from a finite number of relatively homogeneous clusters. A good example of such a situation is modeling market segmentation. Order selection in mixture models, i.e. selecting the correct number of...

Regressions often use pre-orthogonalized regressors. For example, the exposure of a stock's return to exchange-rate changes is conventionally estimated by regression, and often, the market return is included as an additional regressor. By first orthogonalizing the market return on the exchange...