Braxton Pugh

2021-01-05

a) “ Factor analysis is an important concept in data analysis”, Comment on this statement with suitable arguments to describe the technique.

krolaniaN

Factor analysis is used when the IV(independent variable) can be affected by the presence of any kind of observable, unobservable or error combining terms. It is a part of GLM. It presumes certain characteristics for the data
-there is a linear relationship between the variables
-There is no multicollinearity
-there exists correlation between variables and factors.
The principle component analysis is the most common factor analysis technique.
Factor analysis equation : $X=\mu +L\cdot F+ϵ$
where $\mu$ is mean of the variable $ϵ$ is specific factor F is common factor L is the loading of the variable on factor
The main use of factor analysis is it helps to condense the IVs and obtain results from clusters. For eg, if we face similar questions of almost the type, such as, your satisfaction with product X, would you recommend it to others and would you buy it in future as well? Factor analysis helps to club such similar responses and eases the method of data analysis.

Do you have a similar question?