# Factor Analysis

 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 . 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.

 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 consumer’s choice of tooth paste Major factors for determining for a consumers’ evaluation of a brand of coffee .

The two variables are reduced into one factor. 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.  For multiple variables more than two items combine together to form a new factor .

It is computed by from correlating factor scores with observed manifest variable scores. Factor Loading: The correlation between a variable and a 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. . It is a underlying dimension. Factor: A variable or construct that is not directly observable but is developed as a linear combination of observed variables.

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

(The analyst has to decide on . The factor matrix gives loading of each variable on each of the extracted factor. This helps us to decide the variables in a factor. How many factors to extract ? (use of eigen values)  2. Stage II – Rotation of principal components This gives the rotated factor matrix .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.

. all answers on a scale of 1 to 7 ( 1 = completely agree. Example 1 : Data file ‘ factor. Ten questions were asked to each of them.sav’ or ‘factor1.sav’ Twenty 2-wheeler users were surveyed about their perception and image attributes of the vehicles they owned. 7 = completely disagree).

Low maintenance cost makes the two wheeler very economical. 5. . A two wheeler is essentially a man’s vehicle. 4. I use a two wheeler because it is affordable. 2.1. 3. It gives me a sense of freedom to own a two wheeler. I feel very powerful when I am on my two wheeler.

9.6. 10. Three . Some of my friends who don’t have there own vehicle are jealous of me. 8. I think two wheelers are a safe way to travel. I feel good when ever I see the ad of my two wheeler. people should be legally allowed on a two wheeler 7. My vehicle gives me a comfortable ride.

 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 .

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

. + WikXk where Fi = Wi = k = estimate of i th factor weight or factor score coefficient number of variables . The common factors themselves can be expressed as linear combinations of the observed variables. . Fi = Wi1X1 + Wi2X2 + Wi3X3 + .Factor Analysis Model The unique factors are uncorrelated with each other and with the common factors.

Some More Statistics associated with Factor Analysis .

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

The Kaiser-MeyerOlkin (KMO) measure of sampling adequacy is an index used to examine the appropriateness of factor analysis.5 and 1.0) indicate factor analysis is appropriate. Values below 0.Statistics Associated with Factor Analysis  Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy.5 imply that factor analysis may not be appropriate. . High values (between 0.