Factor Analysis (DATA REDUCTION TECHNIQUE)

It is not bothered/affected by type of DV and IV

All statements are interval/scale/ratio in nature ie all data has to be numeric in nature
We do not check correlation
When we run FA, to check adequacy of samples, we should have 5 times number of responses
as compared to variables
Analyse data reduction factor

OUTPUT:

1.

Total Variance Explained

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sum

Compon
ent Total % of Variance Cumulative % Total % of Variance Cumulative % Total %o

1 3.883 38.828 38.828 3.883 38.828 38.828 3.841

2 2.777 27.770 66.598 2.777 27.770 66.598 2.429

3 1.375 13.747 80.346 1.375 13.747 80.346 1.764

4 .945 9.449 89.795

5 .479 4.793 94.588

6 .292 2.923 97.511

7 .117 1.166 98.677

8 .068 .680 99.356

9 .037 .374 99.730

10 .027 .270 100.000

Extraction Method: Principal Component Analysis.

Three factors are explaining variation upto 80.346%

2.
Rotated Component Matrixa

Component

1 2 3

I use a 2-wheeler because it

.126 .313 .780
is affordable.

It gives me a sense of
-.181 -.639 -.107
freedom to own a 2-wheeler.

Low maintenance cost

makes a 2-wheeler very -.116 .604 .594
economical in the long run.

A 2-wheeler is essentially a
.970 -.064 -.006
mans vehicle.

I feel very powerful when I

.964 .131 .063
am on my 2-wheeler.
Some of my friends who
dont have their own vehicle .945 -.140 .030
are jealous of me.

I feel good whenever I see

the ad for 2-wheeler on T.V.,
.971 .024 .106
in a magazine or on a
hoarding.

My vehicle gives me a
-.262 .848 .101
comfortable ride.

I think 2-wheelers are a safe

.010 .881 -.044
way to travel.

Three people should be

legally allowed to travel on a .063 -.149 .874
2-wheeler.

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

Depending on size of the data, we decide threshold values 05/0.4/0.7 ,more data, less variation

In this data, we choose .7

Interpretation:

The highlighted values are factor loading of variables 4,5,6,7.

Factor loading more than 0.7 are considered for analysis
We name this factor as Pride of ownership
Factor2: combine 8 and 9 which has high loading of 0.85 and 0.87
we call it Functional values/utility
Factor3: High loading on var 1,10
we name it Economical

3.
BARTLETS TEST OF SPERICITY:

We want to prove that correlation is insignificant.

Variables can be interrelated but not factors( this is the reason we combine variables in above
highlighted table)

Ho: correlation is significant

H1: Correlation is insignificant

KMO table

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .618

Bartlett's Test of Sphericity Approx. Chi-Square 164.098

df 45

Sig. .000

P value is less than 0.05 indicates the rejection of hypothesis that correlation matrix of the variables is
insignificant.

The sample size is five times the number of variables(10), so the sampling adequacy required for factor
analysis is also justified, which is not true in this case as it has only 20 observations
 KMO test is for sampling adequacy. Please note that the KMO statistics is 0.618 indicates that factor
analysis can be used for this data

KMO ANALYSIS IS MORE THAN 0.5 MEANS THAT DATA IS ADEQUATE AND FA CAN BE USED.

EXCEL

Eigen value for factor 1,2 and 3 is being calculated as sum of square of factor 1,2 and 3 in Component
matrix table in output which is same as in the eigen values table

Total Variance Explained

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loa
Compon
ent Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cu

1 3.883 38.828 38.828 3.883 38.828 38.828 3.841 38.409

2 2.777 27.770 66.598 2.777 27.770 66.598 2.429 24.294

3 1.375 13.747 80.346 1.375 13.747 80.346 1.764 17.643

4 .945 9.449 89.795

5 .479 4.793 94.588

6 .292 2.923 97.511

7 .117 1.166 98.677

8 .068 .680 99.356

9 .037 .374 99.730

10 .027 .270 100.000

Extraction Method: Principal Component Analysis.

3.88 is eigen value for factor 1 and so on

% of var explained by factor 1 =eigen value of factor 1 x 100
sum total of all eigen values

CALCULATION OF COMMUNALITY: explanation of original variable variance

Communality is denoted by 2

Comm for 1st variable is 0.72 which means 72% of variance or information content of the first
variable is explained by 3 factors.