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Logistic Regression
Multiple Discriminant Analysis
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Example: Discriminant Analysis
• Stage 4:
- The cutting score was calculated as -0.773
- Classification matrix was calculated by classifying an
observation as Specification buying/Total value
analysis if it’s Z-score was less/greater than –0.773
- Classification accuracy was obtained and assessed
using certain benchmarks
Example: Discriminant Analysis
• Step 5: Interpretation
-Since we have a single discriminant function, we will
look at the discriminant weights, loadings and partial F
values
- Discriminant loadings are more valid for interpretation.
We see that X7 discriminates the most followed by X1
and then X3
- Going back to table of group means, we see that firms
employing Specification Buying focus on ‘Product
quality’, whereas firms using Total Value Analysis focus
on ‘Delivery speed’ and ‘Price flexibility’ in that order
Example: Logistic Regression
1) Overview
2) Basic Concept
Fig. 19.1
Factor 2
Football Baseball
Evening at home
Factor 1
Go to a party
Home is best place
Plays
Movies
Factor Analysis Model
Each variable is expressed as a linear combination of factors.
The factors are some common factors plus a unique factor. The
factor model is represented as:
where
Xi = i th standardized variable
Aij = standardized mult reg coeff of var i on common factor j
Fj = common factor j
Vi = standardized reg coeff of var i on unique factor i
Ui = the unique factor for variable i
m = number of common factors
Factor Analysis Model
• The first set of weights (factor score coefficients)
are chosen so that the first factor explains the
largest portion of the total variance.
Where:
Fi = estimate of i th factor
Wi= weight or factor score coefficient
k = number of variables
Statistics Associated with Factor Analysis
• Bartlett's test of sphericity. Bartlett's test of
sphericity is used to test the hypothesis that the
variables are uncorrelated in the population (i.e.,
the population corr matrix is an identity matrix)
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Conducting Factor Analysis
Fig. 19.2
Problem formulation
Rotation of Factors
Interpretation of Factors
Calculation of
Factor Scores
Bartlett’s Test
Apprx. chi-square=111.3, df=15, significance=0.00
Kaiser-Meyer-Olkin msa=0.660
Communalities
Variables Initial Extraction
V1 1.000 0.926
V2 1.000 0.723
V3 1.000 0.894
V4 1.000 0.739
V5 1.000 0.878
V6 1.000 0.790
2.5
2.0
Eigenvalue
1.5
1.0
0.5
0.0
1 2 3 4 5 6
Component Number
Factor Matrix Before and After Rotation
Fig. 19.4
Factors Factors
Variables 1 2 Variables 1 2
1 X 1 X
2 X X 2 X
3 X 3 X
4 X X 4 X
5 X X 5 X
6 X 6 X
(a) (b)
High Loadings High Loadings
Before Rotation After Rotation
Factor Loading Plot
Fig. 19.5
Rotated Component Matrix
Rotated Space 1 2
1.0 V4
V6
V2
V1 0.962 -2.66E-02
0.5
V2 -5.72E-02 0.848
Component 2
V1
0.0 V3 0.934 -0.146
V5 V3
V4 -9.83E-02 0.854
-0.5
V5 -0.933 -8.40E-02
V6 8.337E-02 0.885
-1.0
-1.0 -0.5 0.0 0.5 1.0
Component 1
Results of Common Factor Analysis
Table 19.4