Factor Analysis data reduction technique

PC 1 F1

PC 2 F2

Too many variables Correlated among themselves

Fewer factors/PCs Not correlated among themselves

Rate each of the following features on their importance, as per your opinion. 1 least important, 7 most important. ATM Internet Phone Mobile In-house Forex Retail CRM Parking Approach road 1 2 3 4 5 6 7 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7

PASW data sheet

ATM
1 2 3 . . . . . . . . ..72

Int 2

Ph 1

Mb

In-hs

Forex

Retail

CRM

Park

Rd 6

Correlation coefficient = 0.379

000.1 613. 181. 272. 891. 522. 072. 681. 923. 012. daor hcaorppA

613. 000.1 540. 542. 342. 521. 571. 391. 743. 011. gnikraP

181. 540. 000.1 206. 601. 980.140.550.370.731. MRC

272. 542. 206. 000.1 191. 670.670.850. 160. 941. liateR

891. 342. 601. 191. 000.1 881. 782. 991. 553. 521. xeroF

522. 521. 980.670.881. 000.1 124. 724. 254. 072. esuoh-nI

072. 571. 140.670.782. 124. 000.1 685. 915. 604. eliboM

681. 391. 550.850. 991. 724. 685. 000.1 025. 513. enohP

923. 743. 370.160. 553. 254. 915. 025. 000.1 973. tenretnI

012. daor hcaorppA 011. gnikraP 731. MRC 941. liateR 521. xeroF 072. esuoh-nI 604. eliboM 513. enohP 973. tenretnI 000.1 MTA MTA

PASW output

Step 1: data screening - using correlation matrix Example 1 UBI Customer Services

xirtaM noitalerroC

Step 2: Tests of the adequacy of data for FA

tseT s'tteltraB dna OMK

H0 : V = I
V = Population correlation Matrix (10 X 10)

H1 : V I

000. 54 568.791

Reject H0 VI there is adequate correlation among variables to do an FA

747.

.giS fd erauqS-ihC .xorppA

.ycauqedA gnilpmaS fo erusaeM niklO-reyeM-resiaK yticirehpS fo tseT s'tteltraB

> 0.6 good

< 0.05 (= E)

Bartlett's Test of Spericity explained V12 0 1 V32 V13 0 V13 1 V1p 0 V2p V3p

.. .. ..

V=

V21 V31

(p x p ............................ square ... matrix)

... Vp1 Vp2 Vp3 .. 1

0 1 0

0 0 1

0 0 0

I=
(p x p Identity matrix)

0 0

Find the eigen roots of the matrix C = - 2 7

4 1

Eigen values (latent roots, characteristic roots) p original variables p x p Sample correlation matrix R PI= 0, where I pxp is an identity matrix p eigen values, P1, P2, ......... , Pp each eigen value corresponds to a factor/PC p factors or PCs In the table of Total Variance Explained (next slide) the eigen values are arranged in order of magnitude largest ... to . smallest F1/PC1 to . F p/PC p

.sisylanA tnenopmoC lapicnirP :dohteM noitcartxE explained is more 458.06 482.01 820.1 075.05 323.81 238.1 742.23 742.23 522.3 % evitalumuC ecnairaV fo % latoT sgnidaoL derauqS fo smuS noitcartxE denialpxE ecnairaV latoT By default eigen values > 1 so that total variance no. of components If not ask for higher Satisfied ? 192. 983. 754. 195. 166. 207. 328. 820.1 238.1 522.3 latoT 01 9 8 7 6 5 4 3 2 1 tnenopmoC

oR

000.001 219.2 880.79 298.3 691.39 375.4 426.88 319.5 017.28 706.6 401.67 220.7 280.96 822.8 458.06 482.01 075.05 323.81 742.23 742.23 % evitalumuC ecnairaV fo % seulavnegiE laitinI

Step 3: Extracting the Factors - Total Variance Explained

Step 3: Extracting the Factors Scree plot

Screes off indicates the no. of major components

.detcartxe stnenopmoc 3 .a .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 491.916.301. 853. 390. 843.271. 861. 321.615. 3 925. 364. 226. 680. 312. 494. 357. 817. 997. 175. 1 533. 762. 603.708. 948. 581. 072.032.141.050. 2 tnenopmoC daor hcaorppA gnikraP esuoh-nI MRC liateR xeroF eliboM enohP tenretnI MTA

xiataM tnenopmoC r

Step 4: Unrotated component matrix = component leadings

+1

PC 3

0.683, 0.347 0.571, 0.516

PC 1
-1

(0,0)

+1

-1

.snoitareti 5 ni degrevnoc noitatoR .a .noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 682. 230. 341.688. 628. 180. 360.330.070.743. 3 542. 030. 966. 740.960.002. 597. 057. 366. 386. 1 635. 718. 651. 800. 892. 495. 281. 871. 874. 090.2 tnenopmoC daor hcaorppA gnikraP esuoh-nI MRC liateR xeroF eliboM enohP tenretnI MTA

Step 5: Rotated component matrix

xirta M tnenopmoC detatoR a

.snoitareti 5 ni degrevnoc noitatoR .a .noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 635. 718. 688. 628. 495. 966. 597. 057. 366. 386. 3 2 tnenopmoC 1 daor hcaorppA gnikraP MRC liateR xeroF esuoh-nI eliboM enohP tenretnI MTA

xirtaM tnenopmoC detatoR a

Rotated component matrix

.noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 000.1 000. 000. 3
$ Identity matrix

000. 000.1 000. 2

000. 000. 000.1 1

3 2 1 tnenopmoC

xirtaM ecnairavoC erocS tnenopmoC

Step 6: Component Score Covariance matrix

.snoitareti 5 ni degrevnoc noitatoR .a .noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 635. 718. 688. 628. 495. 966. 597. 057. 366. 386. 3 2 tnenopmoC 1 daor hcaorppA gnikraP MRC liateR xeroF esuoh-nI eliboM enohP tenretnI MTA

xirtaM tnenopmoC detatoR a

Total Variance Explained = 60.854

3 components

.snoitareti 6 ni degrevnoc noitatoR .a .noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 007. 038. 298. 828. 509. 476. 008. 657. 976. 186. 4 3 2 tnenopmoC 1 daor hcaorppA gnikraP MRC liateR xeroF esuoh-nI eliboM enohP tenretnI MTA

xirtaM tnenopmoC detatoR a

Total Variance Explained = 69.082

4 components

.snoitareti 6 ni degrevnoc noitatoR .a .noitazilamroN resiaK htiw xamiraV :dohteM noitatoR .sisylanA tnenopmoC lapicnirP :dohteM noitcartxE 448. 819. 788. 648. 719. 825. 735. 777. 867. 566. 647. 4 3 tnenopmoC 2 1 daor hcaorppA gnikraP MRC liateR xeroF esuoh-nI eliboM enohP tenretnI MTA

xartaM tnenopmoC detatoR i

Total Variance Explained = 76.104

5 components

Correlation Matrix
I'd rather spend a quiet evening at home than go to a party I check prices even on small items Magazines are more interesting than movies I will not buy products advertised on bill-boards I am a homebody I save and cash coupons Companies waste a lot of time on advertising

Example 2 Lifestyle
-.004 .628 .082 .675 -.100 -.338

1.000 -.004 .628 1.000 .151 .151 1.000 -.248 -.182 .048 .480 .582 -.251 .090 -.588

.082 .675 -.100 -.338

-.248 .048 .582 -.251

-.182 .480 .090 -.588

1.000 .272 .017 .469

.272 1.000 -.110 -.082

.017

.469

-.110 -.082 1.000 .014

.014 1.000

Component Total 1 2 3 4 5 6 7 2.485 1.821 1.339 .508 .376 .279 .191

Initial Eigenvalues % of Variance Cumulative % 35.505 35.505 26.013 61.518 19.131 80.649 7.258 87.907 5.373 93.280 3.990 97.270 2.730 100.000

Unrotated Component Matrix

Component

2 .378 -.714 -.027 .634 .505 -.604 .383

3 .087 .457 -.043 .597 .329 .689 .426

I'd rather spend a quiet evening at home than go to .817 a party I check prices even on small items .279 Magazines are more interesting than movies I will not buy products advertised on bill-boards I am a homebody .887 -.204 .664

? ?

I save and cash coupons

.050 -.684

Companies waste a lot of time on advertising

Component Score Covariance Matrix Component 1 2 3 1 1.000 .000 .000 2 .000 1.000 .000 3 .000 .000 1.000

Rotated Component Matrix

Component I'd rather spend a quiet evening at home than go to a party I check prices even on small items Magazines are more interesting than movies I will not buy products advertised on bill-boards I am a homebody I save and cash coupons Companies waste a lot of time on advertising

1 .897 .049 .762 .214 .868 -.057 -.351

-.082 -.076 -.232 -.440 .860 .125

.867 -.052 .224 -.017 .091 .911

.817 -.073