Factor Analysis

Factor Analysis

General name for a class of procedures used for data reduction An interdependence technique No attempt is made to divide the variables into criterion versus predictor sets ie. No dependent independent relationship The models typically assume that the data are interval-scaled.

A data reduction procedure

It reduces the data complexity by reducing the number of variables uncovers the hidden structure of a set of variables to smaller number of factors

Main applications

To reduce the number of variables in the study(data) To detect structure in the relationship between variables to classify them To create a set of factors which are uncorrelated variables for handling multicollinearity in multiple regression
EXAMPLES

Major factors for determining for a consumers choice of tooth paste Major factors for determining for a consumers evaluation of a brand of coffee

Suppose there are two items and questions/statements are pertaining to

shinny teeth and attractive teeth It is most likely that the responses to the two items are highly correlated. A regression line can then be fitted that gives the best summary of the two variables. The two variables are reduced into one factor.

For multiple variables more than two items combine together to form a new factor

Factor Analysis: A set of techniques for finding the number and characteristics of variables underlying a large number of measurements made on individuals or objects. Factor: A variable or construct that is not directly observable but is developed as a linear combination of observed variables. It is a underlying dimension. Factor Loading: The correlation between a variable and a factor. It is computed by from correlating factor scores with observed manifest variable scores.

Factor Score: A value for each factor that is assigned to each person. It is derived from a summation of the derived weights which are applied to the original data variables. Communality (h2): The common variance of each variable summarized by the factors, or the amount (percent) of each variable that is explained by the factors. Eigenvalue: The sum of squares of loadings of each factor. It is a measure of the variance of each factor, and if divided by the number of variables (i.e., the total variance), it is the percent of variance summarized by the factor.

Method there are two stages 1. Stage I Factor extraction process (How many factors should be extracted from the data) The most common procedure used to do this Principal component Analysis the eigen values are used to determine this. How many factors to extract ? (use of eigen values)

2. Stage II Rotation of principal components This gives the rotated factor matrix . The factor matrix gives loading of each variable on each of the extracted factor. This helps us to decide the variables in a factor.(The analyst has to decide on

Example 1 : Data file factor.sav or factor1.sav

Twenty 2-wheeler users were surveyed about their perception and image attributes of the vehicles they owned. Ten questions were asked to each of them, all answers on a scale of 1 to 7 ( 1 = completely agree, 7 = completely disagree).

1. I use a two wheeler because it is affordable. 2. It gives me a sense of freedom to own a two wheeler. 3. Low maintenance cost makes the two wheeler very economical. 4. A two wheeler is essentially a mans vehicle. 5. I feel very powerful when I am on my two wheeler.

6.

Some of my friends who dont have there own vehicle are jealous of me. I feel good when ever I see the ad of my two wheeler. My vehicle gives me a comfortable ride. I think two wheelers are a safe way to travel. people should be legally allowed on a two wheeler

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10. Three

SPSS commands for factor analysis

Click on ANALYS Click on DATA REDUCTION followed by FACIOR Select variables Under extraction select principle components Under display select unrotated factor solution Under extract select eigen value > 1 Under analyse select correlation matrix Click on rotation Select varimax under method Click OK

Example 2: Data file Factor2.sav 20 respondents who had recently flown jet airways were asked to indicate on a seven point scale ( 1 = completely agree, 7 = completely disagree), their agreement or disagreement with a set of 10 questions relating to their perceptions and attributes of the airline The 10 statements were 1. They are always on time 2. The seats are comfortable 3. I love the food they provide 4. Their air-hostesses are very beautiful 5. My boss/friend flies the same airline 6. Their aircrafts are younger 7. I get the advantage of frequent fliers program 8. The flight timings suit my schedule 9. My mom feels safe when I fly with them 10. Flying Jet complements my lifestyle and social standing

Factor Analysis Model

The unique factors are uncorrelated with each other and with the common factors. The common factors themselves can be expressed as linear combinations of the observed variables. Fi = Wi1X1 + Wi2X2 + Wi3X3 + . . . + WikXk
where Fi = Wi = k =

estimate of i th factor weight or factor score coefficient number of variables

Some More Statistics associated with Factor Analysis

Statistics Associated with Factor Analysis

Bartlett's test of sphericity. Bartlett's test of sphericity is a test statistic used to examine the hypothesis that the variables are uncorrelated in the population. In other words, the population correlation matrix is an identity matrix; each variable correlates perfectly with itself (r = 1) but has no correlation with the other variables (r = 0).

Statistics Associated with Factor Analysis

Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy. The Kaiser-MeyerOlkin (KMO) measure of sampling adequacy is an index used to examine the appropriateness of factor analysis. High values (between 0.5 and 1.0) indicate factor analysis is appropriate. Values below 0.5 imply that factor analysis may not be appropriate.