Functional data analysis with an application in the capital structure of California Hospitals

This chapter introduces functional data analysis, a relatively new technique for data analysis in Business Analytics. The distinct feature of this technique is that it deals with smooth functions or processes, which generate the discretized data sample that we observe. The functional approach allows us to flexibly model system dynamics, to analyze observations with measurement errors, and to fit data with sparse observations. We illustrate the application of functional data analysis in the capital structure of California hospitals. We also point out the functional data analysis application in business research and future research directions.