How to do Factor Analysis (Factor Analysis Steps)?

Factor analysis is a statistical method used to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved variables called factors. Here are the general steps involved in conducting a factor analysis:

1. Determine the Suitability of Data for Factor Analysis

  • Bartlett’s Test: Check the significance level to determine if the correlation matrix is suitable for factor analysis.
  • Kaiser-Meyer-Olkin (KMO) Measure: Verify the sampling adequacy. A value greater than 0.6 is generally considered acceptable.

2. Choose the Extraction Method

  • Principal Component Analysis (PCA): Used when the main goal is data reduction.
  • Principal Axis Factoring (PAF): Used when the main goal is to identify underlying factors.

3. Factor Extraction

  • Use the chosen extraction method to identify the initial factors.
  • Extract eigenvalues to determine the number of factors to retain. Factors with eigenvalues greater than 1 are typically retained in the analysis.
  • Compute the initial factor loadings.

4. Determine the Number of Factors to Retain

  • Scree Plot: Plot the eigenvalues in descending order to visualize the point where the plot levels off (the “elbow”) to determine the number of factors to retain.
  • Eigenvalues: Retain factors with eigenvalues greater than 1.

5. Factor Rotation

  • Orthogonal Rotation (Varimax, Quartimax): Assumes that the factors are uncorrelated.
  • Oblique Rotation (Promax, Oblimin): Allows the factors to be correlated.
  • Rotate the factors to achieve a simpler and more interpretable factor structure.
  • Examine the rotated factor loadings.

6. Interpret and Label the Factors

  • Analyze the rotated factor loadings to interpret the underlying meaning of each factor.
  • Assign meaningful labels to each factor based on the variables with high loadings on that factor.

7. Compute Factor Scores (if needed)

  • Calculate the factor scores for each individual to represent their value on each factor.

8. Report and Validate the Results

  • Report the final factor structure, including factor loadings and communalities.
  • Validate the results using additional data or by conducting a confirmatory factor analysis if necessary.

Factor Analysis | Data Analysis

Factor analysis is a statistical method used to analyze the relationships among a set of observed variables by explaining the correlations or covariances between them in terms of a smaller number of unobserved variables called factors.

Table of Content

  • What is Factor Analysis?
  • What does Factor mean in Factor Analysis?
  • How to do Factor Analysis (Factor Analysis Steps)?
  • Factor Analysis Example (Factor Analyzer):
  • Why do we need factor analysis?
  • Most Commonly used Terms in Factor Analysis
  • Types of Factor Analysis
  • Types of Factor Extraction Methods
  • Assumptions of Factor Analysis
  • FAQs : Factor analysis

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What is Factor Analysis?

Factor analysis, a method within the realm of statistics and part of the general linear model (GLM), serves to condense numerous variables into a smaller set of factors. By doing so, it captures the maximum shared variance among the variables and condenses them into a unified score, which can subsequently be utilized for further analysis.Factor analysis operates under several assumptions: linearity in relationships, absence of multicollinearity among variables, inclusion of relevant variables in the analysis, and genuine correlations between variables and factors. While multiple methods exist, principal component analysis stands out as the most prevalent approach in practice....

What does Factor mean in Factor Analysis?

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1. What are the steps of factor analysis?...