Structural equation modeling

Structural equation modeling (SEM) is a

diverse set of methods used by scientists doing
both observational and experimental research.
SEM is used mostly in the social and behavioral
sciences but it is also used in epidemiology,[2]
business,[3] and other fields. A definition of SEM
is difficult without reference to technical
language, but a good starting place is the name
itself.

SEM involves a model representing how various

aspects of some phenomenon are thought to Figure 1. An example structural equation model after
causally connect to one another. Structural estimation. Latent variables are sometimes indicated
equation models often contain postulated causal with ovals while observed variables are shown in
connections among some latent variables rectangles. Residuals and variances are sometimes
(variables thought to exist but which can't be drawn as double-headed arrows (shown here) or single
directly observed). Additional causal connections arrows and a circle (as in Figure 2). The latent IQ
link those latent variables to observed variables variance is fixed at 1 to provide scale to the model.
whose values appear in a data set. The causal Figure 1 depicts measurement errors influencing each
connections are represented using equations but indicator of latent intelligence and each indicator of latent
the postulated structuring can also be presented achievement. Neither the indicators nor the
using diagrams containing arrows as in Figures 1 measurement errors of the indicators are modeled as
and 2. The causal structures imply that specific influencing the latent variables.[1]
patterns should appear among the values of the
observed variables. This makes it possible to use
the connections between the observed variables' values to estimate the magnitudes of the postulated effects,
and to test whether or not the observed data are consistent with the requirements of the hypothesized causal
structures.[4]

The boundary between what is and is not a structural equation model is not always clear but SE models
often contain postulated causal connections among a set of latent variables (variables thought to exist but
which can't be directly observed, like an attitude, intelligence or mental illness) and causal connections
linking the postulated latent variables to variables that can be observed and whose values are available in
some data set. Variations among the styles of latent causal connections, variations among the observed
variables measuring the latent variables, and variations in the statistical estimation strategies result in the
SEM toolkit including confirmatory factor analysis, confirmatory composite analysis, path analysis, multi-
group modeling, longitudinal modeling, partial least squares path modeling, latent growth modeling and
hierarchical or multilevel modeling.[5][6][7][8][9]

SEM researchers use computer programs to estimate the strength and sign of the coefficients corresponding
to the modeled structural connections, for example the numbers connected to the arrows in Figure 1.
Because a postulated model such as Figure 1 may not correspond to the worldly forces controlling the
observed data measurements, the programs also provide model tests and diagnostic clues suggesting which
indicators, or which model components, might introduce inconsistency between the model and observed
data. Criticisms of SEM methods hint at:
disregard of available model tests, problems in
the model's specification, a tendency to accept
models without considering external validity, and
potential philosophical biases.[10]

A great advantage of SEM is that all of these

measurements and tests occur simultaneously in
one statistical estimation procedure, where all the
model coefficient are calculated using all
information from the observed variables. This
means the estimates are more accurate than if a
researcher were to calculate each part of the
model separately.[11]
History
Structural equation modeling (SEM) began
differentiating itself from correlation and
regression when Sewall Wright provided explicit
causal interpretations for a set of regression-style
equations based on a solid understanding of the
physical and physiological mechanisms
producing direct and indirect effects among his
observed variables.[12][13][14] The equations
were estimated like ordinary regression equations
but the substantive context for the measured
variables permitted clear causal, not merely
predictive, understandings. O. D. Duncan
introduced SEM to the social sciences in his
1975 book[15] and SEM blossomed in the late
1970's and 1980's when increasing computing
power permitted practical model estimation. In
1987 Hayduk[6] provided the first book-length
introduction to structural equation modeling with latent variables, and this was soon followed by Bollen's
popular text (1989).[16]
Figure 2. An example structural equation model before
estimation. Similar to Figure 1 but without standardized
values and fewer items. Because intelligence and
academic performance are merely imagined or theory-
postulated variables, their precise scale values are
unknown, though the model specifies that each latent
variable's values must fall somewhere along the
observable scale possessed by one of the indicators.
The 1.0 effect connecting a latent to an indicator
specifies that each real unit increase or decrease in the
latent variable's value results in a corresponding unit
increase or decrease in the indicator's value. It is hoped
a good indicator has been chosen for each latent, but the
1.0 values do not signal perfect measurement because
this model also postulates that there are other
unspecified entities causally impacting the observed
indicator measurements, thereby introducing
measurement error. This model postulates that separate
measurement errors influence each of the two indicators
of latent intelligence, and each indicator of latent
achievement. The unlabeled arrow pointing to academic
performance acknowledges that things other than
intelligence can also influence academic performance.

Different yet mathematically related modeling approaches developed in psychology, sociology, and
economics. Early Cowles Commission work on simultaneous equations estimation centered on Koopman
and Hood's (1953) algorithms from transport economics and optimal routing, with maximum likelihood
estimation, and closed form algebraic calculations, as iterative solution search techniques were limited in the
days before computers. The convergence of two of these developmental streams (factor analysis from
psychology, and path analysis from sociology via Duncan) produced the current core of SEM. One of
several programs Karl Jöreskog developed at Educational Testing Services, LISREL[17][18][19] embedded
latent variables (which psychologists knew as the latent factors from factor analysis) within path-analysis-
style equations (which sociologists inherited from Wright and Duncan). The factor-structured portion of the
model incorporated measurement errors which permitted measurement-error-adjustment, though not
necessarily error-free estimation, of effects connecting different postulated latent variables.
Traces of the historical convergence of the factor analytic and path analytic traditions persist as the
distinction between the measurement and structural portions of models; and as continuing disagreements
over model testing, and whether measurement should precede or accompany structural estimates.[20][21]
Viewing factor analysis as a data-reduction technique deemphasizes testing, which contrasts with path
analytic appreciation for testing postulated causal connections – where the test result might signal model
misspecification. The friction between factor analytic and path analytic traditions continue to surface in the
literature and on SEMNET – a free listserve circulating SEM postings to more than 3,000 registrants,
supported by a University of Alabama listserv. The SEMNET archive can be searched for user-specified
topics, and many of the 2023 updates to this Wikipedia page were previously circulated on SEMNET for
knowledgeable review and comment.

Wright's path analysis influenced Hermann Wold, Wold's student Karl Jöreskog, and Jöreskog's student
Claes Fornell, but SEM never gained a large following among U.S. econometricians, possibly due to
fundamental differences in modeling objectives and typical data structures. The prolonged separation of
SEM's economic branch led to procedural and terminological differences, though deep mathematical and
statistical connections remain.[22][23] The economic version of SEM can be seen in SEMNET discussions
of endogeneity, and in the heat produced as Judea Pearl's approach to causality via directed acyclic graphs
(DAG's) rubs against economic approaches to modeling.[4] Discussions comparing and contrasting various
SEM approaches are available[24][25] but disciplinary differences in data structures and the concerns
motivating economic models make reunion unlikely. Pearl[4] extended SEM from linear to nonparametric
models, and proposed causal and counterfactual interpretations of the equations. Nonparametric SEMs
permit estimating total, direct and indirect effects without making any commitment to linearity of effects or
assumptions about the distributions of the error terms.[25]

SEM analyses are popular in the social sciences because computer programs make it possible to estimate
complicated causal structures, but the complexity of the models introduces substantial variability in the
quality of the results. Some, but not all, results are obtained without the "inconvenience" of understanding
experimental design, statistical control, the consequences of sample size, and other features contributing to
good research design.

General steps and considerations

The following considerations apply to the construction and assessment of many structural equation models.

Model specification

Building or specifying a model requires attending to:

the set of variables to be employed,

what is known about the variables,
what is presumed or hypothesized about the variables' causal connections and
disconnections,
what the researcher seeks to learn from the modeling,
and the cases for which values of the variables will be available (kids? workers?
companies? countries? cells? accidents? cults?).
Structural equation models attempt to mirror the worldly forces operative for causally homogeneous cases –
namely cases enmeshed in the same worldly causal structures but whose values on the causes differ and
who therefore possess different values on the outcome variables. Causal homogeneity can be facilitated by
case selection, or by segregating cases in a multi-group model. A model's specification is not complete until
the researcher specifies:

which effects and/or correlations/covariances are to be included and estimated,

which effects and other coefficients are forbidden or presumed unnecessary,
and which coefficients will be given fixed/unchanging values (e.g. to provide measurement
scales for latent variables as in Figure 2).

The latent level of a model is composed of endogenous and exogenous variables. The endogenous latent
variables are the true-score variables postulated as receiving effects from at least one other modeled
variable. Each endogenous variable is modeled as the dependent variable in a regression-style equation.
The exogenous latent variables are background variables postulated as causing one or more of the
endogenous variables and are modeled like the predictor variables in regression-style equations. Causal
connections among the exogenous variables are not explicitly modeled but are usually acknowledged by
modeling the exogenous variables as freely correlating with one another. The model may include
intervening variables – variables receiving effects from some variables but also sending effects to other
variables. As in regression, each endogenous variable is assigned a residual or error variable encapsulating
the effects of unavailable and usually unknown causes. Each latent variable, whether exogenous or
endogenous, is thought of as containing the cases' true-scores on that variable, and these true-scores
causally contribute valid/genuine variations into one or more of the observed/reported indicator
variables.[26]

The LISREL program assigned Greek names to the elements in a set of matrices to keep track of the
various model components. These names became relatively standard notation, though the notation has been
extended and altered to accommodate a variety of statistical considerations.[19][6][16][27] Texts and
programs "simplifying" model specification via diagrams or by using equations permitting user-selected
variable names, re-convert the user's model into some standard matrix-algebra form in the background. The
"simplifications" are achieved by implicitly introducing default program "assumptions" about model
features with which users supposedly need not concern themselves. Unfortunately, these default
assumptions easily obscure model components that leave unrecognized issues lurking within the model's
structure, and underlying matrices.

Two main components of models are distinguished in SEM: the structural model showing potential causal
dependencies between endogenous and exogenous latent variables, and the measurement model showing
the causal connections between the latent variables and the indicators. Exploratory and confirmatory factor
analysis models, for example, focus on the causal measurement connections, while path models more
closely correspond to SEMs latent structural connections.

Modelers specify each coefficient in a model as being free to be estimated, or fixed at some value. The free
coefficeints may be postulated effects the researcher wishes to test, background correlations among the
exogenous variables, or the variances of the residual or error variables providing additional variations in the
endogenous latent variables. The fixed coefficients may be values like the 1.0 values in Figure 2 that
provide a scales for the latent variables, or values of 0.0 which assert causal disconnections such as the
assertion of no-direct-effects (no arrows) pointing from Academic Achievement to any of the four scales in
Figure 1. SEM programs provide estimates and tests of the free coefficients, while the fixed coefficients
contribute importantly to testing the overall model structure. Various kinds of constraints between
coefficients can also be used.[27][6][16] The model specification depends on what is known from the
literature, the researcher's experience with the modeled indicator variables, and the features being
investigated by using the speific model structure.
There is a limit to how many coefficients can be estimated in a model. If there are fewer data points than the
number of estimated coefficients, the resulting model is said to be "unidentified" and no coefficient
estimates can be obtained. Reciprocal effect, and other causal loops, may also interfere with
estimation.[28][29][27]

Estimation of free model coefficients

Model coefficients fixed at zero, 1.0, or other values, do not require estimation because they already have
specified values. Estimated values for free model coefficients are obtained by maximizing fit to, or
minimizing difference from, the data relative to what the data's features would be if the free model
coefficients took on the estimated values. The model's implications for what the data should look like for a
specific set of coefficient values depends on: a) the coefficients' locations in the model (e.g. which variables
are connected/disconnected), b) the nature of the connections between the variables (covariances or effects;
with effects often assumed to be linear), c) the nature of the error or residual variables (often assumed to be
independent of, or causally-disconnected from, many variables), and d) the measurement scales appropriate
for the variables (interval level measurement is often assumed).

A stronger effect connecting two latent variables implies the indicators of those latents should be more
strongly correlated. Hence, a reasonable estimate of a latent's effect will be whatever value best matches the
correlations between the indicators of the corresponding latent variables – namely the estimate-value
maximizing the match with the data, or minimizing the differences from the data. With maximum likelihood
estimation, the numerical values of all the free model coefficients are individually adjusted (progressively
increased or decreased from initial start values) until they maximize the likelihood of observing the sample
data – whether the data are the variables' covariances/correlations, or the cases' actual values on the
indicator variables. Ordinary least squares estimates are the coefficient values that minimize the squared
differences between the data and what the data would look like if the model was correctly specified,
namely if all the model's estimated features correspond to real worldly features.

The appropriate statistical feature to maximize or minimize to obtain estimates depends on the variables'
levels of measurement (estimation is generally easier with interval level measurements than with nominal or
ordinal measures), and where a specific variable appears in the model (e.g. endogenous dichotomous
variables create more estimation difficulties than exogenous dichotomous variables). Most SEM programs
provide several options for what is to be maximized or minimized to obtain estimates the model's
coefficients. The choices often include maximum likelihood estimation (MLE), full information maximum
likelihood (FIML), ordinary least squares (OLS), weighted least squares (WLS), diagonally weighted least
squares (DWLS), and two stage least squares.[27]

One common problem is that a coefficient's estimated value may be underidentified because it is
insufficiently constrained by the model and data. No unique best-estimate exists unless the model and data
together sufficiently constrain or restrict a coefficient's value. For example, the magnitude of a single data
correlation between two variables is insufficient to provide estimates of a reciprocal pair of modeled effects
between those variables. The correlation might be accounted for by one of the reciprocal effects being
stronger than the other effect, or the other effect being stronger than the one, or by effects of equal
magnitude. Underidentified effect estimates can be rendered identified by introducing additional model
and/or data constraints. For example, reciprocal effects can be rendered identified by constraining one effect
estimate to be double, triple, or equivalent to, the other effect estimate,[29] but the resultant estimates will
only be trustworthy if the additional model constraint corresponds to the world's structure. Data on a third
variable that directly causes only one of a pair of reciprocally causally connected variables can also assist
identification.[28] Constraining a third variable to not directly cause one of the reciprocally-causal variables
breaks the symmetry otherwise plaguing the reciprocal effect estimates because that third variable must be
more strongly correlated with the variable it causes directly than with the variable at the "other" end of the
reciprocal which it impacts only indirectly.[28] Notice that this again presumes the properness of the model's
causal specification – namely that there really is a direct effect leading from the third variable to the variable
at this end of the reciprocal effects and no direct effect on the variable at the "other end" of the reciprocally
connected pair of variables. Theoretical demands for null/zero effects provide helpful constraints assisting
estimation, though theories often fail to clearly report which effects are allegedly nonexistent.

Model assessment

Model assessment depends on the theory, the data, the model, and the estimation strategy. Hence model
assessments consider:

whether the data contain reasonable measurements of appropriate variables,

whether the modeled case are causally homogeneous, (It makes no sense to estimate
one model if the data cases reflect two or more different causal networks.)
whether the model appropriately represents the theory or features of interest, (Models
are unpersuasive if they omit features required by a theory, or contain coefficients
inconsistent with that theory.)
whether the estimates are statistically justifiable, (Substantive assessments may be
devastated: by violating assumptions, by using an inappropriate estimator, and/or by
encountering non-convergence of iterative estimators.)
the substantive reasonableness of the estimates, (Negative variances, and correlations
exceeding 1.0 or -1.0, are impossible. Statistically possible estimates that are inconsistent
with theory may also challenge theory, and our understanding.)
the remaining consistency, or inconsistency, between the model and data. (The
estimation process minimizes the differences between the model and data but important and
informative differences may remain.)

Research claiming to test or "investigate" a theory requires attending to beyond-chance model-data

inconsistency. Estimation adjusts the model's free coefficients to provide the best possible fit to the data.
The output from SEM programs includes a matrix reporting the relationships among the observed variables
that would be observed if the estimated model effects actually controlled the observed variables' values.
The "fit" of a model reports match or mismatch between the model-implied relationships (often
covariances) and the corresponding observed relationships among the variables. Large and significant
differences between the data and the model's implications signal problems. The probability accompanying a
χ2 (chi-squared) test is the probability that the data could arise by random sampling variations if the
estimated model constituted the real underlying population forces. A small χ2 probability reports it would
be unlikely for the current data to have arisen if the modeled structure constituted the real population causal
forces – with the remaining differences attributed to random sampling variations.

If a model remains inconsistent with the data despite selecting optimal coefficient estimates, an honest
research response reports and attends to this evidence (often a significant model χ2 test).[30] Beyond-
chance model-data inconsistency challenges both the coefficient estimates and the model's capacity for
adjudicating the model's structure, irrespective of whether the inconsistency originates in problematic data,
inappropriate statistical estimation, or incorrect model specification. Coefficient estimates in data-
inconsistent ("failing") models are interpretable, as reports of how the world would appear to someone
believing a model that conflicts with the available data. The estimates in data-inconsistent models do not
necessarily become "obviously wrong" by becoming statistically strange, or wrongly signed according to
theory. The estimates may even closely match a theory's requirements but the remaining data inconsistency
renders the match between the estimates and theory unable to provide succor. Failing models remain
interpretable, but only as interpretations that conflict with available evidence.
Replication is unlikely to detect misspecified models which inappropriately-fit the data. If the replicate data
is within random variations of the original data, the same incorrect coefficient placements that provided
inappropriate-fit to the original data will likely also inappropriately-fit the replicate data. Replication helps
detect issues such as data mistakes (made by different research groups), but is especially weak at detecting
misspecifications after exploratory model modification – as when confirmatory factor analysis (CFA) is
applied to a random second-half of data following exploratory factor analysis (EFA) of first-half data.

A modification index is an estimate of how much a model's fit to the data would "improve" (but not
necessarily how much the model's structure would improve) if a specific currently-fixed model coefficient
were freed for estimation. Researchers confronting data-inconsistent models can easily free coefficients the
modification indices report as likely to produce substantial improvements in fit. This simultaneously
introduces a substantial risk of moving from a causally-wrong-and-failing model to a causally-wrong-but-
fitting model because improved data-fit does not provide assurance that the freed coefficients are
substantively reasonable or world matching. The original model may contain causal misspecifications such
as incorrectly directed effects, or incorrect assumptions about unavailable variables, and such problems
cannot be corrected by adding coefficients to the current model. Consequently, such models remain
misspecified despite the closer fit provided by additional coefficients. Fitting yet worldly-inconsistent
models are especially likely to arise if a researcher committed to a particular model (for example a factor
model having a desired number of factors) gets an initially-failing model to fit by inserting measurement
error covariances "suggested" by modification indices. MacCallum (1986) demonstrated that "even under
favorable conditions, models arising from specification serchers must be viewed with caution."[31] Model
misspecification may sometimes be corrected by insertion of coefficients suggested by the modification
indices, but many more corrective possibilities are raised by employing a few indicators of similar-yet-
importantly-different latent variables.[32]

"Accepting" failing models as "close enough" is also not a reasonable alternative. A cautionary instance
was provided by Browne, MacCallum, Kim, Anderson, and Glaser who addressed the mathematics behind
why the χ2 test can have (though it does not always have) considerable power to detect model
misspecification.[33] The probability accompanying a χ2 test is the probability that the data could arise by
random sampling variations if the current model, with its optimal estimates, constituted the real underlying
population forces. A small χ2 probability reports it would be unlikely for the current data to have arisen if
the current model structure constituted the real population causal forces – with the remaining differences
attributed to random sampling variations. Browne, McCallum, Kim, Andersen, and Glaser presented a
factor model they viewed as acceptable despite the model being significantly inconsistent with their data
according to χ2. The fallaciousness of their claim that close-fit should be treated as good enough was
demonstrated by Hayduk, Pazkerka-Robinson, Cummings, Levers and Beres[34] who demonstrated a
fitting model for Browne, et al.'s own data by incorporating an experimental feature Browne, et al.
overlooked. The fault was not in the math of the indices or in the over-sensitivity of χ2 testing. The fault
was in Browne, MacCallum, and the other authors forgetting, neglecting, or overlooking, that the amount
of ill fit cannot be trusted to correspond to the nature, location, or seriousness of problems in a model's
specification.[35]

Many researchers tried to justify switching to fit-indices, rather than testing their models, by claiming that
χ2 increases (and hence χ2 probability decreases) with increasing sample size (N). There are two mistakes
in discounting χ2 on this basis. First, for proper models, χ2 does not increase with increasing N,[30] so if χ2
increases with N that itself is a sign that something is detectably problematic. And second, for models that
are detectably misspecified, χ2 increase with N provides the good-news of increasing statistical power to
detect model misspecification (namely power to detect Type II error). Some kinds of important
misspecifications cannot be detected by χ2,[35] so any amount of ill fit beyond what might be reasonably
produced by random variations warrants report and consideration.[36][30] The χ2 model test, possibly
adjusted,[37] is the strongest available structural equation model test.

Numerous fit indices quantify how closely a model fits the data but all fit indices suffer from the logical
difficulty that the size or amount of ill fit is not trustably coordinated with the severity or nature of the issues
producing the data inconsistency.[35] Models with different causal structures which fit the data identically
well, have been called equivalent models.[27] Such models are data-fit-equivalent though not causally
equivalent, so at least one of the so-called equivalent models must be inconsistent with the world's structure.
If there is a perfect 1.0 correlation between X and Y and we model this as X causes Y, there will be perfect
fit and zero residual error. But the model may not match the world because Y may actually cause X, or both
X and Y may be responding to a common cause Z, or the world may contain a mixture of these effects (e.g.
like a common cause plus an effect of Y on X), or other causal structures. The perfect fit does not tell us the
model's structure corresponds to the world's structure, and this in turn implies that getting closer to perfect
fit does not necessarily correspond to getting closer to the world's structure – maybe it does, maybe it
doesn't. This makes it incorrect for a researcher to claim that even perfect model fit implies the model is
correctly causally specified. For even moderately complex models, precisely equivalently-fitting models are
rare. Models almost-fitting the data, according to any index, unavoidably introduce additional potentially-
important yet unknown model misspecifications. These models constitute a greater research impediment.

This logical weakness renders all fit indices "unhelpful" whenever a structural equation model is
significantly inconsistent with the data,[36] but several forces continue to propagate fit-index use. For
example, Dag Sorbom reported that when someone asked Karl Joreskog, the developer of the first
structural equation modeling program, "Why have you then added GFI?" to your LISREL program,
Joreskog replied "Well, users threaten us saying they would stop using LISREL if it always produces such
large chi-squares. So we had to invent something to make people happy. GFI serves that purpose."[38] The
χ2 evidence of model-data inconsistency was too statistically solid to be dislodged or discarded, but people
could at least be provided a way to distract from the "disturbing" evidence. Career-profits can still be
accrued by developing additional indices, reporting investigations of index behavior, and publishing models
intentionally burying evidence of model-data inconsistency under an MDI (a mound of distracting indices).
There seems no general justification for why a researcher should "accept" a causally wrong model, rather
than attempting to correct detected misspecifications. And some portions of the literature seems not to have
noticed that "accepting a model" (on the basis of "satisfying" an index value) suffers from an intensified
version of the criticism applied to "acceptance" of a null-hypothesis. Introductory statistics texts usually
recommend replacing the term "accept" with "failed to reject the null hypothesis" to acknowledge the
possibility of Type II error. A Type III error arises from "accepting" a model hypothesis when the current
data are sufficient to reject the model.

Whether or not researchers are committed to seeking the world’s structure is a fundamental concern.
Displacing test evidence of model-data inconsistency by hiding it behind index claims of acceptable-fit,
introduces the discipline-wide cost of diverting attention away from whatever the discipline might have
done to attain a structurally-improved understanding of the discipline’s substance. The discipline ends up
paying a real costs for index-based displacement of evidence of model misspecification. The frictions
created by disagreements over the necessity of correcting model misspecifications will likely increase with
increasing use of non-factor-structured models, and with use of fewer, more-precise, indicators of similar
yet importantly-different latent variables.[32]

The considertions relevant to using fit indices include checking:

1.
 2. whether data concerns have been addressed (to ensure data mistakes are not driving
model-data inconsistency);
3.
4. whether criterion values for the index have been investigated for models structured like the
researcher's model (e.g. index criterion based on factor structured models are only
appropriate if the researcher's model actually is factor structured);
5.
6. whether the kinds of potential misspecifications in the current model correspond to the kinds
of misspecifications on which the index criterion are based (e.g. criteria based on simulation
of omitted factor loadings may not be appropriate for misspecification resulting from failure to
include appropriate control variables);
7.
8. whether the researcher knowingly agrees to disregard evidence pointing to the kinds of
misspecifications on which the index criteria were based. (If the index criterion is based on
simulating a missing factor loading or two, using that criterion acknowledges the
researcher's willingness to accept a model missing a factor loading or two.);
9.
10. whether the latest, not outdated, index criteria are being used (because the criteria for some
indices tightened over time);
11.
12. whether satisfying criterion values on pairs of indices are required (e.g. Hu and Bentler[39]
report that some common indices function inappropriately unless they are assessed
together.);
13. whether a model test is, or is not, available. (A χ2 value, degrees of freedom, and probability
will be available for models reporting indices based on χ2.)
14.
15. and whether the researcher has considered both alpha (Type I) and beta (Type II) errors in
making their index-based decisions (E.g. if the model is significantly data-inconsistent, the
"tolerable" amount of inconsistency is likely to differ in the context of medical, business,
social and psychological contexts.).

Some of the more commonly used fit statistics include

Chi-square
A fundamental test of fit used in the calculation of many other fit measures. It is a function
of the discrepancy between the observed covariance matrix and the model-implied
covariance matrix. Chi-square increases with sample size only if the model is detectably
misspecified.[30]
Akaike information criterion (AIC)
An index of relative model fit: The preferred model is the one with the lowest AIC value.

where k is the number of parameters in the statistical model, and L is the maximized
value of the likelihood of the model.
Root Mean Square Error of Approximation (RMSEA)

Fit index where a value of zero indicates the best fit.[40] Guidelines for determining a
"close fit" using RMSEA are highly contested.[41]
 Standardized Root Mean Squared Residual (SRMR)
The SRMR is a popular absolute fit indicator. Hu and Bentler (1999) suggested .08 or
smaller as a guideline for good fit.[42]
Comparative Fit Index (CFI)
In examining baseline comparisons, the CFI depends in large part on the average size of
the correlations in the data. If the average correlation between variables is not high, then
the CFI will not be very high. A CFI value of .95 or higher is desirable.[42]

The following table provides references documenting these, and other, features for some common indices:
the RMSEA (Root Mean Square Error of Approximation), SRMR (Standardized Root Mean Squared
Residual), CFI (Confirmatory Fit Index), and the TLI (the Tucker-Lewis Index). Additional indices such as
the AIC (Akaike Information Criterion) can be found in most SEM introductions.[27] For each measure of
fit, a decision as to what represents a good-enough fit between the model and the data reflects the
researcher's modeling objective (perhaps challenging someone else's model, or improving measurement);
whether or not the model is to be claimed as having been "tested"; and whether the researcher is
comfortable "disregarding" evidence of the index-documented degree of ill fit.[30]
 Features of Fit Indices
RMSEA SRMR CFI

Root Mean Square Error

of Standardized Root Mean
Confirmatory Fit
Index Name
Approximation Squared Residual Index

Formula RMSEA = sq-root((χ2 -

d)/(d(N-1)))

Basic References [43] [44] [45]

Factor Model proposed wording

for critical values .06 wording?[39]

NON-Factor Model proposed

wording

for critical values

References proposing
revised/changed,
[39] [39] [39]
disagreements over critical
values

References indicating two-index or

paired-index
[39] [39] [39]
criteria are required

Index based on χ2 Yes No Yes

References recommending against

use
[36] [36] [36]
of this index

[36] [45] [44] [43]

Sample size, power, and estimation

Researchers agree samples should be large enough to provide stable coefficient estimates and reasonable
testing power but there is no general consensus regarding specific required sample sizes, or even how to
determine appropriate sample sizes. Recommendations have been based on the number of coefficients to be
estimated, the number of modeled variables, and Monte Carlo simulations addressing specific model
coefficients.[27] Sample size recommendations based on the ratio of the number of indicators to latents are
factor oriented and do not apply to models employing single indicators having fixed nonzero measurement
error variances.[32] Overall, for moderate sized models without statistically difficult-to-estimate coefficients,
the required sample sizes (N’s) seem roughly comparable to the N’s required for a regression employing all
the indicators.

The larger the sample size, the greater the likelihood of including cases that are not causally homogeneous.
Consequently, increasing N to improve the likelihood of being able to report a desired coefficient as
statistically significant, simultaneously increases the risk of model misspecification, and the power to detect
the misspecification. Researchers seeking to learn from their modeling (including potentially learning their
model requires adjustment or replacement) will strive for as large a sample size as permitted by funding and
by their assessment of likely population-based causal heterogeneity/homogeneity. If the available N is huge,
modeling sub-sets of cases can control for variables that might otherwise disrupt causal homogeneity.
Researchers fearing they might have to report their model’s deficiencies are torn between wanting a larger
N to provide sufficient power to detect structural coefficients of interest, while avoiding the power capable
of signaling model-data inconsistency. The huge variation in model structures and data characteristics
suggests adequate sample sizes might be usefully located by considering other researchers’ experiences
(both good and bad) with models of comparable size and complexity that have been estimated with similar
data.

Interpretation

Causal interpretations of SE models are the clearest and most understandable but those interpretations will
be fallacious/wrong if the model’s structure does not correspond to the world’s causal structure.
Consequently, interpretation should address the overall status and structure of the model, not merely the
model’s estimated coefficients. Whether a model fits the data, and/or how a model came to fit the data, are
paramount for interpretation. Data fit obtained by exploring, or by following successive modification
indices, does not guarantee the model is wrong but raises serious doubts because these approaches are
prone to incorrectly modeling data features. For example, exploring to see how many factors are required
preempts finding the data are not factor structured, especially if the factor model has been “persuaded” to fit
via inclusion of measurement error covariances. Data’s ability to speak against a postulated model is
progressively eroded with each unwarranted inclusion of a “modification index suggested” effect or error
covariance. It becomes exceedingly difficult to recover a proper model if the initial/base model contains
several misspecifications.[46]

Direct-effect estimates are interpreted in parallel to the interpretation of coefficients in regression equations
but with causal commitment. Each unit increase in a causal variable’s value is viewed as producing a
change of the estimated magnitude in the dependent variable’s value given control or adjustment for all the
other operative/modeled causal mechanisms. Indirect effects are interpreted similarly, with the magnitude of
a specific indirect effect equaling the product of the series of direct effects comprising that indirect effect.
The units involved are the real scales of observed variables’ values, and the assigned scale values for latent
variables. A specified/fixed 1.0 effect of a latent on a specific indicator coordinates that indicator’s scale
with the latent variable’s scale. The presumption that the remainder of the model remains constant or
unchanging may require discounting indirect effects that might, in the real world, be simultaneously
prompted by a real unit increase. And the unit increase itself might be inconsistent with what is possible in
the real world because there may be no known way to change the causal variable’s value. If a model adjusts
for measurement errors, the adjustment permits interpreting latent-level effects as referring to variations in
true scores.[26]

SEM interpretations depart most radically from regression interpretations when a network of causal
coefficients connects the latent variables because regressions do not contain estimates of indirect effects.
SEM interpretations should convey the consequences of the patterns of indirect effects that carry effects
from background variables through intervening variables to the downstream dependent variables. SEM
interpretations encourage understanding how multiple worldly causal pathways can work in coordination,
or independently, or even counteract one another. Direct effects may be counteracted (or reinforced) by
indirect effects, or have their correlational implications counteracted (or reinforced) by the effects of
common causes.[15] The meaning and interpretation of specific estimates should be contextualized in the
full model.

SE model interpretation should connect specific model causal segments to their variance and covariance
implications. A single direct effect reports that the variance in the independent variable produces a specific
amount of variation in the dependent variable’s values, but the causal details of precisely what makes this
happens remains unspecified because a single effect coefficient does not contain sub-components available
for integration into a structured story of how that effect arises. A more fine-grained SE model incorporating
variables intervening between the cause and effect would be required to provide features constituting a
story about how any one effect functions. Until such a model arrives each estimated direct effect retains a
tinge of the unknown, thereby invoking the essence of a theory. A parallel essential unknownness would
accompany each estimated coefficient in even the more fine-grained model, so the sense of fundamental
mystery is never fully eradicated from SE models.

Even if each modeled effect is unknown beyond the identity of the variables involved and the estimated
magnitude of the effect, the structures linking multiple modeled effects provide opportunities to express
how things function to coordinate the observed variables – thereby providing useful interpretation
possibilities. For example, a common cause contributes to the covariance or correlation between two
effected variables, because if the value of the cause goes up, the values of both effects should also go up
(assuming positive effects) even if we do not know the full story underlying each cause.[15] (A correlation
is the covariance between two variables that have both been standardized to have variance 1.0). Another
interpretive contribution might be made by expressing how two causal variables can both explain variance
in a dependent variable, as well as how covariance between two such causes can increase or decrease
explained variance in the dependent variable. That is, interpretation may involve explaining how a pattern
of effects and covariances can contribute to decreasing a dependent variable’s variance.[47] Understanding
causal implications implicitly connects to understanding “controlling”, and potentially explaining why some
variables, but not others, should be controlled.[4][48] As models become more complex these fundamental
components can combine in non-intuitive ways, such as explaining how there can be no correlation (zero
covariance) between two variables despite the variables being connected by a direct non-zero causal
effect.[15][16][6][29]

The statistical insignificance of an effect estimate indicates the estimate could rather easily arise as a random
sampling variation around a null/zero effect, so interpreting the estimate as a real effect becomes equivocal.
As in regression, the proportion of each dependent variable’s variance explained by variations in the
modeled causes are provided by R2 , though the Blocked-Error R2 should be used if the dependent variable
is involved in reciprocal or looped effects, or if it has an error variable correlated with any predictor’s error
variable.[49]

The caution appearing in the Model Assessment section warrants repeat. Interpretation should be possible
whether a model is or is not consistent with the data. The estimates report how the world would appear to
someone believing the model – even if that belief is unfounded because the model happens to be wrong.
Interpretation should acknowledge that the model coefficients may or may not correspond to “parameters”
– because the model’s coefficients may not have corresponding worldly structural features.

Adding new latent variables entering or exiting the original model at a few clear causal locations/variables
contributes to detecting model misspecifications which could otherwise ruin coefficient interpretations. The
correlations between the new latent’s indicators and all the original indicators contribute to testing the
original model’s structure because the few new and focused effect coefficients must work in coordination
with the model’s original direct and indirect effects to coordinate the new indicators with the original
indicators. If the original model’s structure was problematic, the sparse new causal connections will be
insufficient to coordinate the new indicators with the original indicators, thereby signaling the
inappropriateness of the original model’s coefficients through model-data inconsistency.[29] The
correlational constraints grounded in null/zero effect coefficients, and coefficients assigned fixed nonzero
values, contribute to both model testing and coefficient estimation, and hence deserve acknowledgment as
the scaffolding supporting the estimates and their interpretation.[29]

Interpretations become progressively more complex for models containing interactions, nonlinearities,
multiple groups, multiple levels, and categorical variables.[27] For interpretations of coefficients in models
containing interactions, see { reference needed }, for multilevel models see { reference needed }, for
longitudinal models see, { reference needed }, and for models containing categoric variables see {
reference needed }. Effects touching causal loops, reciprocal effects, or correlated residuals also require
slightly revised interpretations.[6][29]

Careful interpretation of both failing and fitting models can provide research advancement. To be
dependable, the model should investigate academically informative causal structures, fit applicable data
with understandable estimates, and not include vacuous coefficients.[50] Dependable fitting models are rarer
than failing models or models inappropriately bludgeoned into fitting, but appropriately-fitting models are
possible.[34][51][52][53]

The multiple ways of conceptualizing PLS models[54] complicate interpretation of PLS models. Many of
the above comments are applicable if a PLS modeler adopts a realist perspective by striving to ensure their
modeled indicators combine in a way that matches some existing but unavailable latent variable. Non-
causal PLS models, such as those focusing primarily on R2 or out-of-sample predictive power, change the
interpretation criteria by diminishing concern for whether or not the model’s coefficients have worldly
counterparts. Money can be made from statistically significant predictors even if the modeler is not
interested in the worldly structural forces providing the predictive power. The fundamental features
differentiating the five PLS modeling perspectives discussed by Rigdon, Sarstedt and Ringle[54] point to
differences in PLS modelers’ objectives, and corresponding differences in model features warranting
interpretation.

Caution should be taken when making claims of causality even when experiments or time-ordered
investigations have been undertaken. The term causal model must be understood to mean "a model that
conveys causal assumptions", not necessarily a model that produces validated causal conclusions -- maybe
it does maybe it does not. Collecting data at multiple time points and using an experimental or quasi-
experimental design can help rule out certain rival hypotheses but even a randomized experiments cannot
fully rule out threats to causal claims. No research design can fully guarantee causal structures.[4]

Controversies and Movements

Structural equation modeling is fraught with controversies, many of which surfaced in discussions on
SEMNET and which remain available in SEMNET’s archive. SEMNET is a free listserv made available
by the University of Alabama. Researchers from the factor analytic tradition commonly attempt to reduce
sets of multiple indicators to fewer, more manageable, scales or factor-scores for later use in path-structured
models. This constitutes a stepwise process with the initial measurement step providing scales or factor-
scores which are to be used later in a path-structured model. This stepwise approach seems obvious but
actually confronts severe underlying deficiencies. The segmentation into steps interferes with thorough
checking of whether the scales or factor-scores validly represent the indicators, and/or validly report on
latent level effects. A structural equation model simultaneously incorporating both the measurement and
latent-level structures not only checks whether the latent factors appropriately coordinates the indicators, it
also checks whether that same latent simultaneously appropriately coordinates each latent’s indictors with
the indicators of theorized causes and/or consequences of that latent.[29] If a latent is unable to do both
these styles of coordination, the validity of that latent is questioned, and a scale or factor-scores purporting
to measure that latent is questioned. The SEMNET disagreements swirled around respect for, or disrespect
of, evidence challenging the validity of postulated latent factors. The simmering, sometimes boiling,
SEMNET discussions resulted in a special issue of the journal Structural Equation Modeling focused on a
target article by Hayduk and Glaser[20] followed by several comments and a rejoinder,[21] all made freely
available, thanks to the efforts of George Marcoulides.

These discussions fueled disagreement over whether or not structural equation models should be tested for
consistency with the data, and model testing became the next focus of SEMNET discussions. The
SEMNETers having path-modeling histories tended to defend careful model testing while those with factor-
histories tended to defend fit-indexing rather than fit-testing. This round of SEMNET discussions led to a
target article in Personality and Individual Differences by Paul Barrett[36] who said: “In fact, I would now
recommend banning ALL such indices from ever appearing in any paper as indicative of model
“acceptability” or “degree of misfit”.” [36](page 821). Barrett’s article was also accompanied by
commentary from both perspectives.[50][55]

The controversy over model testing declined as SEMNET moved toward requiring clear report of
significant model-data inconsistency. Scientists do not get to ignore, or fail to report, evidence just because
they do not like what the evidence reports.[30] The requirement of attending to evidence pointing toward
model misspecification underpins more recent SEMNET concern for addressing “endogeneity” – a style of
model misspecification that interferes with estimation due to lack of independence of error/residual
variables. In general, the controversy over the causal nature of structural equation models, including factor-
models, has also been declining. Even Stan Mulaik, a factor-analysis stalwart, has acknowledged the causal
basis of factor models.[56] The comments by Bollen and Pearl regarding myths about causality in the
context of SEM[25] reinforced the centrality of causal thinking in the context of SEM.

A briefer SEMNET controversy focused on competing models. Comparing competing models can be very
helpful but there are fundamental issues that cannot be resolved by creating two models and retaining the
better fitting model. The statistical sophistication of presentations like Levy and Hancock (2007),[57] for
example, makes it easy to overlook that a researcher might begin with one terrible model and one atrocious
model, and end by retaining the structurally terrible model because some index reports it as better fitting
than the atrocious model. It is unfortunate that even otherwise strong SEM texts like Kline (2016)[27]
remain disturbingly weak in their presentation of model testing.[58] Overall, the contributions that can be
made by structural equation modeling depend on careful and detailed model assessment, even if a failing
model happens to be the best available.

An additional controversy that touched the fringes of the previous controversies awaits ignition on
SEMNET. Factor models and theory-embedded factor structures having multiple indicators tend to fail, and
dropping weak indicators tends to reduce the model-data inconsistency. Reducing the number of indicators
leads to concern for, and controversy over, the minimum number of indicators required to support a latent
variable in a structural equation model. Researchers tied to factor tradition can be persuaded to reduce the
number of indicators to three per latent variable, but three or even two indicators may still be inconsistent
with a proposed underlying factor common cause. Hayduk and Littvay (2012)[32] discussed how to think
about, defend, and adjust for measurement error, when using only a single indicator for each modeled latent
variable. Single indicators have been used effectively in SE models for a long time,[51] but controversy
remains only as far away as a reviewer who has considered measurement form only the factor analytic
perspective.
Though declining, traces of these controversies are scattered throughout the SEM literature, and you can
easily incite disagreement by asking: What should be done with models that are significantly inconsistent
with the data? Or by asking: Does model simplicity override respect for evidence of data inconsistency? Or,
what weight should be given to indexes which show close or not-so-close data fit for some models? Or,
should we be especially lenient toward, and “reward”, parsimonious models that are inconsistent with the
data? Or, given that the RMSEA condones disregarding some real ill fit for each model degree of freedom,
doesn’t that mean that people testing models with null-hypotheses of non-zero RMSEA are doing deficient
model testing? Considerable variation in statistical sophistication is required to cogently address such
questions, though responses will likely center on the non-technical matter of whether or not researchers are
required to report and respect evidence.

Extensions, modeling alternatives, and statistical kin

Categorical dependent variables
Categorical intervening variables
Copulas {reference required}
Fusion validity models[59]
item response theory models
Latent class models
Latent growth modeling
Link functions
Longitudinal models
Measurement invariance models
Mixture model,lLatent class models
Multilevel models, hierarchical models (e.g. people nested in groups)
Multiple group modelling with or without constraints between groups (genders, cultures, test
forms, languages, etc.)
Multi-method multi-trait models
Random intercepts models
Structural Equation Model Trees

Software
Structural equation modeling programs differ widely in their capabilities and user requirements.[60][61]
Generally, the “simpler” or “more convenient” the user input, the greater the number of implicit model
assumptions, and the greater the risk of problems created by insufficient attention to research design,
methodology, measurement, estimation, or overlooked modeling problems. Good practice requires
reporting both the program used, and the version of the program used.

LISREL (not free) the first full SEM software, introduced basic notation
https://ssicentral.com/index.php/products/lisrel/
Mplus (not free) https://www.statmodel.com/
SEM in Stata (not free) https://www.stata.com/features/structural-equation-modeling/
sem (free R program)
Lavaan (free R program)[62] https://cran.r-project.org/web/packages/lavaan/index.html
OpenMX (free R program) https://cran.r-project.org/web/packages/OpenMx/index.html
AMOS (not free) https://www.ibm.com/products/structural-equation-modeling-sem
 EQs (not free) https://www.azom.com/software-details.aspx?SoftwareID=11
Stata

See also
Causal model – Conceptual model in philosophy of science
Graphical model – Probabilistic model
Multivariate statistics – Simultaneous observation and analysis of more than one outcome
variable
Partial least squares path modeling
Partial least squares regression – Statistical method
Simultaneous equations model – Type of statistical model
Causal map – A network consisting of links or arcs between nodes or factors
Bayesian Network – Statistical model

Abbreviatons
CFA = Confirmatory Factor Analysis

CFI = Comparative Fit Index

DWLS = Diagonally Weighted Least Squares

EFA = Exploratory Factor Analysis

ESEM = Exploratory Structural Equation Modeling

GFI = Goodness of Fit Index

MIIV = Model Implied Instrumental Variables[63]

OLS = Ordinary Least Squares

RMSEA = Root Mean Square Error of Approximation

RMSR = Root Mean Squared Residual

SRMR = Standardized Root Mean Squared Residual

SEM = Structural Equation Model or Modeling

WLS = Weighted Least Squares

χ2 = Chi square

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Bibliography
Hu, Li‐tze; Bentler, Peter M (1999). "Cutoff criteria for fit indexes in covariance structure
analysis: Conventional criteria versus new alternatives". Structural Equation Modeling. 6: 1–
55. doi:10.1080/10705519909540118 (https://doi.org/10.1080%2F10705519909540118).
hdl:2027.42/139911 (https://hdl.handle.net/2027.42%2F139911).
Kaplan, D. (2008). Structural Equation Modeling: Foundations and Extensions (2nd ed.).
SAGE. ISBN 978-1412916240.
Kline, Rex (2011). Principles and Practice of Structural Equation Modeling (Third ed.).
Guilford. ISBN 978-1-60623-876-9.
MacCallum, Robert; Austin, James (2000). "Applications of Structural Equation Modeling in
Psychological Research" (http://www-psychology.concordia.ca/fac/kline/sem/qicss/maccallu
m.pdf) (PDF). Annual Review of Psychology. 51: 201–226.
doi:10.1146/annurev.psych.51.1.201 (https://doi.org/10.1146%2Fannurev.psych.51.1.201).
PMID 10751970 (https://pubmed.ncbi.nlm.nih.gov/10751970). Retrieved 25 January 2015.
Quintana, Stephen M.; Maxwell, Scott E. (1999). "Implications of Recent Developments in
Structural Equation Modeling for Counseling Psychology". The Counseling Psychologist. 27
(4): 485–527. doi:10.1177/0011000099274002 (https://doi.org/10.1177%2F0011000099274
002). S2CID 145586057 (https://api.semanticscholar.org/CorpusID:145586057).

Further reading
Bagozzi, Richard P; Yi, Youjae (2011). "Specification, evaluation, and interpretation of
structural equation models". Journal of the Academy of Marketing Science. 40 (1): 8–34.
doi:10.1007/s11747-011-0278-x (https://doi.org/10.1007%2Fs11747-011-0278-x).
S2CID 167896719 (https://api.semanticscholar.org/CorpusID:167896719).
 Bartholomew, D. J., and Knott, M. (1999) Latent Variable Models and Factor Analysis
Kendall's Library of Statistics, vol. 7, Edward Arnold Publishers, ISBN 0-340-69243-X
Bentler, P.M. & Bonett, D.G. (1980), "Significance tests and goodness of fit in the analysis of
covariance structures", Psychological Bulletin, 88, 588–606.
Bollen, K. A. (1989). Structural Equations with Latent Variables. Wiley, ISBN 0-471-01171-1
Byrne, B. M. (2001) Structural Equation Modeling with AMOS - Basic Concepts,
Applications, and Programming.LEA, ISBN 0-8058-4104-0
Goldberger, A. S. (1972). Structural equation models in the social sciences. Econometrica
40, 979- 1001.
Haavelmo, Trygve (January 1943). "The Statistical Implications of a System of Simultaneous
Equations". Econometrica. 11 (1): 1–12. doi:10.2307/1905714 (https://doi.org/10.2307%2F1
905714). JSTOR 1905714 (https://www.jstor.org/stable/1905714).
Hoyle, R H (ed) (1995) Structural Equation Modeling: Concepts, Issues, and Applications.
SAGE, ISBN 0-8039-5318-6
Jöreskog, Karl G.; Yang, Fan (1996). "Non-linear structural equation models: The Kenny-
Judd model with interaction effects" (https://books.google.com/books?id=VcHeAQAAQBAJ&
pg=PA57). In Marcoulides, George A.; Schumacker, Randall E. (eds.). Advanced structural
equation modeling: Concepts, issues, and applications. Thousand Oaks, CA: Sage
Publications. pp. 57–88. ISBN 978-1-317-84380-1.
Lewis-Beck, Michael; Bryman, Alan E.; Bryman, Emeritus Professor Alan; Liao, Tim Futing
(2004). "Structural Equation Modeling". The SAGE Encyclopedia of Social Science
Research Methods. doi:10.4135/9781412950589.n979 (https://doi.org/10.4135%2F9781412
950589.n979). hdl:2022/21973 (https://hdl.handle.net/2022%2F21973). ISBN 978-0-7619-
2363-3.
Schermelleh-Engel, K.; Moosbrugger, H.; Müller, H. (2003), "Evaluating the fit of structural
equation models" (http://www.dgps.de/fachgruppen/methoden/mpr-online/issue20/art2/mpr1
30_13.pdf) (PDF), Methods of Psychological Research, 8 (2): 23–74.

External links
Structural equation modeling page under David Garson's StatNotes, NCSU (http://archive.wi
kiwix.com/cache/20110707224407/http://www2.chass.ncsu.edu/garson/pa765/structur.htm)
Issues and Opinion on Structural Equation Modeling (http://disc-nt.cba.uh.edu/chin/ais/),
SEM in IS Research
The causal interpretation of structural equations (or SEM survival kit) by Judea Pearl 2000.
(http://bayes.cs.ucla.edu/BOOK-2K/jw.html)
Structural Equation Modeling Reference List by Jason Newsom (http://archive.wikiwix.com/c
ache/20110707224414/http://www.upa.pdx.edu/IOA/newsom/semrefs.htm): journal articles
and book chapters on structural equation models
Handbook of Management Scales, a collection of previously used multi-item scales to
measure constructs for SEM

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