SPSS ANNOTATED OUTPUT FACTOR ANALYSIS|

The Factor Analysis procedure has several extraction methods for

constructing a solution.
For Data Reduction. The principal components method of
extraction begins by finding a linear combination of variables
(a component) that accounts for as much variation in the
original variables as possible. It then finds another component
that accounts for as much of the remaining variation as possible
and is uncorrelated with the previous component, continuing in
this way until there are as many components as original
variables. Usually, a few components will account for most of
the variation, and these components can be used to replace the
original variables. This method is most often used to reduce the
number of variables in the data file.
For Structure Detection. Other Factor Analysis extraction
methods go one step further by adding the assumption that some
of the variability in the data cannot be explained by the
components (usually called factors in other extraction
methods). As a result, the total variance explained by the
solution is smaller; however, the addition of this structure to
the factor model makes these methods ideal for examining
relationships between the variables.
With any extraction method, the two questions that a good
solution should try to answer are "How many components (factors)
are needed to represent the variables?" and "What do these
components represent?"

An industry analyst would like to predict automobile sales from

a set of predictors. However, many of the predictors are
correlated, and the analyst fears that this might adversely
affect her results.
Factor Analysis Extraction
Method. Allows you to specify the method of factor extraction.
Available methods are principal components, unweighted least
squares, generalized least squares, maximum likelihood,
principal axis factoring, alpha factoring, and image factoring.
Principal Components Analysis. A factor extraction method
used to form uncorrelated linear combinations of the
observed variables. The first component has maximum
variance. Successive components explain progressively
smaller portions of the variance and are all uncorrelated
with each other. Principal components analysis is used to
obtain the initial factor solution. It can be used when a
correlation matrix is singular.

• Unweighted Least-Squares Method. A factor extraction method

that minimizes the sum of the squared differences between
the observed and reproduced correlation matrices (ignoring
the diagonals).

• Generalized Least-Squares Method. A factor extraction

method that minimizes the sum of the squared differences
between the observed and reproduced correlation matrices.
Correlations are weighted by the inverse of their
uniqueness, so that variables with high uniqueness are given
less weight than those with low uniqueness.

• Maximum-Likelihood Method. A factor extraction method that

produces parameter estimates that are most likely to have
produced the observed correlation matrix if the sample is
from a multivariate normal distribution. The correlations
are weighted by the inverse of the uniqueness of the
variables, and an iterative algorithm is employed.

• Principal Axis Factoring. A method of extracting factors

from the original correlation matrix, with squared multiple
correlation coefficients placed in the diagonal as initial
estimates of the communalities. These factor loadings are
used to estimate new communalities that replace the old
communality estimates in the diagonal. Iterations continue
until the changes in the communalities from one iteration to
the next satisfy the convergence criterion for extraction.

• Alpha. A factor extraction method that considers the

variables in the analysis to be a sample from the universe
of potential variables. This method maximizes the alpha
reliability of the factors.

• Image Factoring. A factor extraction method developed by

Guttman and based on image theory. The common part of the
 variable, called the partial image, is defined as its linear
regression on remaining variables, rather than a function of
hypothetical factors.

Analyze. Allows you to specify either a correlation matrix or a

covariance matrix.
Correlation matrix. Useful if variables in your analysis are
measured on different scales.

• Covariance matrix. Useful when you want to apply your factor

analysis to multiple groups with different variances for
each variable.

Factor Analysis Rotation

Method. Allows you to select the method of factor rotation.

Available methods are varimax, direct oblimin, quartimax,
equamax, or promax.

Orthogonal
Varimax (most common)

 minimizes number of variables with extreme loadings (high or

low) on a factor
 makes it possible to identify a variable with a factor
Quartimax

 minimizes the number of factors needed to explain each

variable
 tends to generate a general factor on which most variables
load with medium to high values
 not very helpful for research
Equimax

 combination of Varimax and Quartimax

Oblique
The variables are assessed for the unique relationship between
each factor and the variables (removing relationships that are
shared by multiple factors).
Direct oblimin (DO)

 factors are allowed to be correlated

 diminished interpretability
Promax (Use this one if you're not sure)

 computationally faster than DO

 used for large datasets

Bartlett’s Test of Sphericity

Tests hypothesis that correlation matrix is an identity matrix.

 Diagonals are ones

 Off-diagonals are zeros
A significant result (Sig. < 0.05) indicates matrix is not an
identity matrix; i.e., the variables do relate to one another
enough to run a meaningful EFA.

This table shows two tests that indicate the suitability of your
data for structure detection. The Kaiser-Meyer-Olkin Measure of
Sampling Adequacy is a statistic that indicates the proportion
of variance in your variables that might be caused by underlying
factors. High values (close to 1.0) generally indicate that a
factor analysis may be useful with your data. If the value is
less than 0.50, the results of the factor analysis probably
won't be very useful.
Bartlett's test of sphericity tests the hypothesis that your
correlation matrix is an identity matrix, which would indicate
that your variables are unrelated and therefore unsuitable for
structure detection. Small values (less than 0.05) of the
significance level indicate that a factor analysis may be useful
with your data.

Figure 1. Communalities
Initial communalities are, for correlation analyses, the
proportion of variance accounted for in each variable by the
rest of the variables.
Extraction communalities are estimates of the variance in each
variable accounted for by the factors in the factor solution.
Small values indicate variables that do not fit well with the
factor solution, and should possibly be dropped from the
analysis. The extraction communalities for this solution are
acceptable, although the lower values of Multiple
lines and Calling card show that they don't fit as well as the
others.

Figure 1. Total variance explained, initial eigenvalues

The leftmost section of this table shows the variance explained

by the initial solution. Only three factors in the initial
solution have eigenvalues greater than 1. Together, they account
for almost 65% of the variability in the original variables.
This suggests that three latent influences are associated with
service usage, but there remains room for a lot of unexplained
variation.
Figure 2. Total variance explained, extracted factors

The second section of this table shows the variance explained

by the extracted factors before rotation. The cumulative
variability explained by these three factors in the extracted
solution is about 55%, a difference of 10% from the initial
solution. Thus, about 10% of the variation explained by the
initial solution is lost due to latent factors unique to the
original variables and variability that simply cannot be
explained by the factor model.
Figure 3. Total variance explained, rotated factors

The rightmost section of this table shows the variance explained

by the extracted factors after rotation. The rotated factor
model makes some small adjustments to factors 1 and 2, but factor
3 is left virtually unchanged. Look for changes between the
unrotated and rotated factor matrices to see how the rotation
affects the interpretation of the first and second factors.

Figure 1. Scree plot

The scree plot confirms the choice of three components.

Figure 1. Factor matrix

The relationships in the unrotated factor matrix are somewhat

clear. The third factor is associated with Long distance last
month. The second corresponds most strongly to Equipment last
month, Internet, and Electronic billing. The first factor is
associated with Toll free last month, Wireless last month, Voice
mail, Paging service, Caller ID, Call waiting, Call forwarding,
and 3-way calling. However, some of these "first factor"
services are negatively associated with the second factor; some,
positively. In general, there are a lot of services that have
correlations greater than 0.2 with multiple factors, which
muddies the picture. The rotated factor matrix should clear this
up.
Figure 1. Factor transformation matrix

The factor transformation matrix describes the specific rotation

applied to your factor solution. This matrix is used to compute
the rotated factor matrix from the original (unrotated) factor
matrix. Smaller off-diagonal elements correspond to smaller
rotations. Larger off-diagonal elements correspond to larger
rotations.
Figure 2. Rotated factor matrix

The third factor is largely unaffected by the rotation, but the

first two are now easier to interpret. The first rotated factor
is most highly correlated with Toll free last month, Caller
ID, Call waiting, Call forwarding, and 3-way calling. These
variables are not particularly correlated with the other two
factors.
The second factor is most highly correlated with Equipment last
month, Internet, and Electronic billing.
Thus, there are three major groupings of services, as defined
by the services that are most highly correlated with the three
factors. Given these groupings, you can make the following
observations about the remaining services:
 Because of their moderately large correlations with both
the first and second factors, Wireless last month, Voice
mail, and Paging service bridge the "Extras" and "Tech"
groups.
 Calling card last month is moderately correlated with the
first and third factors, thus it bridges the "Extras" and
"Long Distance" groups.
  Multiple lines is moderately correlated with the second and
third factors, thus it bridges the "Tech" and "Long
Distance" groups.
This suggests avenues for cross-selling. For example, customers
who subscribe to extra services may be more predisposed to
accepting special offers on wireless services than Internet
services.
Using a principal axis factors extraction, you have uncovered
three latent factors that describe relationships between your
variables. These factors suggest various patterns of service
usage, which you can use to more efficiently increase cross-
sales.

See the following texts for more information on factor analysis:

Gorsuch, R. L. 1983. Factor Analysis, 2nd ed. Hillsdale, New
Jersey: Lawrence Erlbaum Associates.
Harman, H. H. 1976. Modern Factor Analysis, 3rd ed. Chicago:
University of Chicago Press.
Kim, J., and C. W. Mueller. 1978. Factor Analysis : What It Is
and How To Do It. Beverly Hills and London: Sage Publications.
Kim, J., and C. W. Mueller. 1978. Factor Analysis : Statistical
Methods and Practical Issues. Beverly Hills and London: Sage
Publications.
Kline, P. 1994. An Easy Guide to Factor Analysis. London:
Routledge.