Professional Documents
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Factor Analysis
Discuss factor analysis and its difference with
respect to other data analysis techniques
including Anova, Regression, and Discriminant
Analysis.
Give some examples of applications of Factor
Analysis.
Discuss the formulation of the model in Factor
Analysis
Steps associated with conducting Factor
Analysis
Two common methods of doing Factor
Analysis
Rotation of Factor
Determination of fit of a model.
19-2
Factor Analysis
Factor analysis is a general name denoting a class
of procedures primarily used for data reduction and
summarization.
Factor analysis is an interdependence technique
in that an entire set of interdependent relationships is
examined without making the distinction between
dependent and independent variables.
Factor analysis is used in the following
circumstances:
To identify underlying dimensions, or factors, that
explain the correlations among a set of variables.
To identify a new, smaller, set of uncorrelated
variables to replace the original set of correlated
variables in subsequent multivariate analysis
Factor analysis assumes that the observed
variables are linear combinations of some
underlying (hypothetical or
observable)factors.
Some of the factors are assumed to be
common to 2 or more variables and some are
assumed to be unique to each variable.
Intelligence Trust
Effect Indicator Model
GP Cl Ver GI H H2 B1 B2
€ €2 €3 €4 € €2 €3 €4
19-8
F1=Trust F2=SES
Effect Indicator Model
H1 H2 B1 B2 Ed Occ Inc Ne
€ €2 €3 €4
F1 F2
Effect Indicator Model
Y Y Y Y X X X X
€ €2 €3 €4
Exposure to Discrimination:
Race, Sex, Age and Disabilities.
Life Stress:
Job Loss, divorce, recent bodily injury, death in family
Structural Bonding
Economic; legal; Strategic; Technical; Formal relationship.
Dependence:
Cost;Benefit;Available of alterantives
Effect Indicators
Trust:
Honest, Benevolence
Intelligence:
GPA, In-class behavior;test-taking ability
under anxiety;Verbal.
Social Bonding:
Personal; Social; family; personal interaction.
Structural Bonding:“degree to which certain ties and link hold a buyer
and seller together in a relationship as a result of some mutually
beneficial economic, strategic, technological, or organizational
objective”. (Williams et. al., 1998)
Scale Used:1= Very unimportant----- 7=very important.
1. Economic benefits associated with your relationship with your bank.
2. Formal contracts or agreements between your firm and Bank
3. Sharing of industry or competitive information between your firm
and bank
4. Electronic ties or linkages between your business firm and bank
(such as electronics mail, access to computerized banking transaction
system etc.)
5. Exchange cards, gifts and the like on birthdays, holidays or on
special events between your firm and bank
Trust:Trust is the perceived credibility and benevolence
of a target of trust (cf.Ganesan 1994; Kumar et al 1995;
Doney and Canon 1997))
Scale Used:1= Strongly disagree----- 7=Strongly agree
1. Our bank rep. has been frank in dealing with us.
2. Our bank can always be counted on to do right thing
3. Our bank does not make false claims.
4. Though circumstances may change, I believe that
our bank will always be ready and willing to offer us
assistance and support.
5. While taking important decision our bank is
concerned about our welfare
6. Based on past experience I can say our bank is
trustworthy
Social Bonding:“is the bonding that takes place between
the individuals of the buyer and seller organization on a
personal and social basis.(Williams et. al., 1998)
Scale Used:
1= Very unimportant----- 7=very important.
1. Establishing personal relationship with you and your
bank representative.
2. Sharing of personal advice or support with your bank
representative.
3.Feelings of belongingness or acceptance between you
and your bank representative
4. Friendship between you and your bank
representative.
19-15
where
Xi = i th standardized variable
Aij = standardized multiple regression coefficient of
variable i on common factor j
F = common factor
Vi = standardized regression coefficient of variable i on
unique factor i
Ui = the unique factor for variable i
m = number of common factors
19-18
where
Fi = estimate of i th factor
Wi = weight or factor score coefficient
k = number of variables
19-19
Rotation of Factors
Interpretation of Factors
Calculation of Selection of
Factor Scores Surrogate Variables
Correlation Matrix
Table 19.2
Variables V1 V2 V3 V4 V5 V6
V1 1.000
V2 -0.530 1.000
V3 0.873 -0.155 1.000
V4 -0.086 0.572 -0.248 1.000
V5 -0.858 0.020 -0.778 -0.007 1.000
V6 0.004 0.640 -0.018 0.640 -0.136 1.000
Scree Plot
Fig 19.2
3.0
2.5
2.0
Eigenvalue
1.5
1.0
0.5
0.0
1 2 3 4 5 6
Component Number
Conducting Factor Analysis
19-32
Rotate Factors
Rotate Factors
Interpret Factors
Component
Variable 1 2
Component Plot in Rotated Space
Component 1 V1 0.962 -2.66E-02
V2 -5.72E-02 0.848
1.0
V4 V6
V3 0.934 -0.146
V2
V4 -9.83E-02 0.854
Component 2
0.5
V5 -0.933 -8.40E-02
0.0
V1 V6 8.337E-02 0.885
V5 V3
-0.5
-1.0
Communalities
Barlett test of sphericity
Variables Initial Extraction
V1 0.859 0.928 • Approx. Chi-Square = 111.314
V2 0.480 0.562 • df = 15
V3 0.814 0.836
• Significance = 0.00000
V4 0.543 0.600
V5 0.763 0.789 • Kaiser-Meyer-Olkin measure of
V6 0.587 0.723 sampling adequacy = 0.660
Initial Eigenvalues
Factor Eigenvalue % of variance Cumulat. %
1 2.731 45.520 45.520
2 2.218 36.969 82.488
3 0.442 7.360 89.848
4 0.341 5.688 95.536
5 0.183 3.044 98.580
6 0.085 1.420 100.000
19-40
SPSS Windows
Analyze>Data Reduction>Factor …
19-44
Factor Rotation
19-45
19-46