Factor Analysis

May 18th 2022

Prof Sani Susanto, PhD

Department of Industrial Engineering
Parahyangan Catholic University
 The Notion of
Factor and Indicator
• We should be familiar with the following two terms: factor and indicator
• Those two are main ingredients in Structural Equations Modeling, which
was our topic 2 (two) weeks ago
• Factor, or more precisely, common factor/latent factor is a synonym for
the term construct
• A construct is a variable that cannot be directly observed
• Another term for construct are common factor, latent factor, unobservable
variable, unobserved variable, nonmeasurable variable, concept
• The construct is a proposed attribute of a person that often cannot be
measured directly, but can be assessed using a number of indicators or
manifest variables.
• Another terms for indicator are manifest variable, observable variable,
observed variable, measurable variable
 The Notion of
Factor and Indicator
• A construct is a variable that cannot be directly observed
• Another term for construct are common factor, latent factor, unobservable
variable, unobserved variable, nonmeasurable variable, concept
• The construct is a proposed attribute of a person that often cannot be
measured directly, but can be assessed using a number of indicators or
manifest variables.
• Another terms for indicator are manifest variable, observable variable,
observed variable, measurable variable
 Some Examples of
Factor and Indicator -1
• Construct: Liver Phisiology (faal hati)
• Indicators: SGOT, SGPT, Gamma GT, Alkali fosfatase, Cholinesterase,
Bilirubin, Bile acid, Total protein, Albumin, Globulin, Gammma globulin,
Protein elektroforesis, TTT, Amylase, Lipase
• Pictorial Description:
 Some Examples of
Factor and Indicator - 2
• Construct: English Mastery
• Indicators: Reading score, Listening score, Writing score, Speaking score
• Pictorial Description:
 Some Examples of
Factor and Indicator - 3
• Construct: The Depth of Love
• Indicators: #SMS, #cadeaus, #yearly visits, #daily miscalls
• Pictorial Description:
 Two Types of Factor Analysis
• There are two types of Factor Analysis:
– Confirmatory Factor Analysis, and
– Exploratory Factor Analysis
 Confirmatory Factor Analysis-1
• In confirmatory factor analysis, the precise structure of the factor model, which is
based on some underlying theory, is hypothesized.
• For example, suppose that based on previous research it is hypothesized that a
construct or factor to measure Organizational Commitment is a construct with 10
indicators as its measures.
• That is, a factor model of Organizational Commitment with 10 indicators is
hypothesized.
• Now suppose we collect data using these 10 indicators.
• The obvious question is: How well do the empirical data conform to the
hypothesized factor model of Organizational Commitment? That is, how well do
the data fit the model? In other words, we want to do an empirical confirmation of
the hypothesized factor model and, as such, confirmatory factor analysis can be
viewed as a technique for theory testing (i.e., hypotheses testing).
• In fact, Confirmatory Factor Analysis is a kind of Construct Validity
 Confirmatory Factor Analysis-2
• Confirmatory Analysis can be done by the IBM SPSS Amos software
• To Illustrate and demonstrate how this analysis works, we start with the following
construct described pictorially as:
 Confirmatory Factor Analysis-3
• Here is the definition of the Organizational Commitment
construct:
 Confirmatory Factor Analysis-4
• Here are the indicators of the Organizational Commitment
construct:
 Confirmatory Factor Analysis-5
• Here are some part of the data
 Confirmatory Factor Analysis -6
• The final result of Confirmatory Analysis to the Organizational
Commitment construct:
Confirmatory Factor Analysis-7
(Start and End)
 Exploratory Factor Analysis-1
• In exploratory factor analysis, the structure of the
factor model or the underlying theory is not known
or specified a priori;
• Rather, data are used to help reveal or identify the
structure of the factor model.
• Thus, exploratory factor analysis can be viewed as a
technique to aid in theory building.
 Exploratory Factor Analysis-1
• In exploratory factor analysis, the structure of the
factor model or the underlying theory is not known
or specified a priori;
• Rather, data are used to help reveal or identify the
structure of the factor model.
• Thus, exploratory factor analysis can be viewed as a
technique to aid in theory building.
 Exploratory Factor Analysis-2
• The rest of the discussion will be followed by a demo
on factor analysis