Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2003/iii/paper-42/3/i/solution

Take logarithms entry by entry before centering. For tree , let , and put . The command var(log(b)) computes the sample covariance matrix with the unbiased estimator normalization
Thus entry is the sum of products of the centered log measurements divided by , not the logarithm of the covariance between the original measurements. Its diagonal entries are the three log-variable sample variances, and the off-diagonal entries are their sample covariances. The positive off-diagonal entries indicate positive association of the log measurements. Taking logarithms turns a multiplicative relation such as into the approximately linear relation , which motivates investigating principal components of these transformed observations.

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