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EconStatsCraft › Heat map
A grid of two categories with colour for the value - the chart for a table too big to read as numbers. Region against year is the common case, and the pattern in the colour is the finding.
A heat map puts a value at every cell of a grid and encodes it as colour. It is the right chart for a matrix - a correlation matrix, a calendar, a region-by-year table - because it shows the whole thing at once and lets pattern-finding do the work. Everything then depends on the colour scale, which is where nearly all heat maps go wrong.
Two categorical dimensions and one measurement - region by year, industry by country, hour by day. Also for correlation matrices, where the pattern of blocks is the finding.
Each cell (i,j) is filled with f(v_{ij}) where f maps values to colours. The map must match the data: a SEQUENTIAL scale for values with a natural low-to-high ordering, and a DIVERGING scale, symmetric about a meaningful midpoint, for values that run negative to positive. For correlations the midpoint must be zero and the range fixed at [-1,1], or the same colour means different things in two charts. Perceptually uniform maps such as viridis are built so equal steps in value are equal perceived steps in colour, which rainbow maps are not.
A correlation matrix drawn with the colour range fitted to the data - say -0.2 to 0.9 - looks dramatic: the weakest correlation is deep blue and the strongest deep red. Fix the range at -1 to 1, as correlations require, and the same matrix is mostly pale, which is the truth: nothing in it is near either extreme. The first chart is not mislabelled or miscalculated, and every reader will come away with a stronger impression of the relationships than the numbers support.
| If you see this | It means | Do this |
|---|---|---|
| Sharp bands in smooth data | A rainbow colour map | Use viridis or another uniform map |
| An all-positive matrix looking half negative | Diverging scale centred on the mean | Centre it on zero |
| No visible pattern | Row and column order | Cluster or sort before concluding there is none |
| Correlation heat maps not comparable | Free colour range per chart | Fix the range at -1 to 1 |
| Cells all one colour | One outlier stretching the scale | Clip, or use a rank or log scale, and say so |
| Red-green diverging scale | Unreadable for around 8% of men | Use blue-orange |
Correlation, the matrix this most often displays. World map, which is a heat map on a geography.
Line chart · Area chart · Bar chart · Stacked bar · Scatter plot · Bubble chart · Histogram · Box plot · Pie chart · Rebased to 100 · Lorenz curve and Gini
Line chart · Area chart · Bar chart · Stacked bar · Scatter plot · Bubble chart · Histogram · Box plot · Pie chart · Heat map · Rebased to 100 · Lorenz curve and Gini
World map · Bivariate map · Flow map · India - state map · India - district map
Descriptive statistics · Summary by group · Two-way table · Classical statistical tests
Multiple regression (OLS) · Logit / Probit · Tobit (censored) · Truncated regression · Multinomial logit · Ordered logit / probit · Quantile regression · Poisson / Negative binomial
Time-varying coefficients (Kalman) · Unit root tests · Correlogram (ACF / PACF) · ARIMA / SARIMA · Rolling-origin cross-validation · Theta method · Unobserved components · STL forecasting · Forecast combination · Markov regime switching · Change frequency (resample) · ARCH / GARCH volatility · Decompose & filter · Spectral analysis · Exponential smoothing · Forecast accuracy
Yield curve (Nelson–Siegel / Svensson) · Dynamic factor model · Dynamic regression (ARIMAX) · Structural VAR · VAR · Granger causality · Cointegration · VECM · ARDL & bounds test
Panel regression · Panel cointegration tests · Heterogeneous panel: Mean Group & PMG · Gravity model of trade · Dynamic panel GMM · Panel diagnostics · Panel unit-root tests
Principal components (PCA) · Factor analysis · Cluster analysis
Conjoint analysis · MaxDiff (best–worst scaling) · TURF - reach of a product line · Price sensitivity (Van Westendorp) · Market basket analysis · Perceptual map · Scale reliability (Cronbach’s alpha) · Key driver analysis
Spatial autocorrelation · Spatial regression · Heckman selection · Instrumental variables (2SLS) · Difference-in-differences · Staggered difference-in-differences · Regression discontinuity · Matching & weighting · Oaxaca–Blinder decomposition
Black–Scholes option pricing · Bond price, duration & convexity · Merton distance to default · EMI / home loan planner · CAPM / beta estimation · Multi-factor model · Portfolio optimization · Value at Risk & Expected Shortfall · Performance & drawdown · Time value of money & NPV/IRR · Equity valuation (DDM, FCF, residual income) · Cost of capital (WACC) · Binomial option pricing · Option strategies (payoff & profit) · Forwards, futures & swaps · Credit risk & Basel capital · Extreme value theory (tail risk)
Life table · Life annuity · Life insurance pricing · Chain ladder reserving · Buhlmann credibility · Survival analysis · Mortality graduation · Aggregate loss model · Ruin probability · Multi-state Markov model · Loss severity fitting
Monte Carlo experiment · F-test, Wald & Chow · Structural breaks & stability
Regression vs machine learning · Ridge / Lasso / Elastic Net · Random forest · Gradient boosting
EconStatsCraft rigorous, plain-spoken econometrics
Regression, panel data, time series and the whole battery of tests. Every result is followed by a verdict you can defend.
Load a dataset to see it here.
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