FACTOR ANALYSIS

Factor analysis attempts to identify underlying variables, or

factors, that explain the pattern of correlation within a set
of observed variables
It allows researchers to investigate concepts that are not
easily directly measured. This combines a large number of
variables into a few easily interpretable underlying factors.

Factor analysis is often used in data reduction to identify a

small number of factors that explain most of the variance
observed in a much larger number of manifest variables.

A Factor ?
It is an abstraction, a hypothetical construct that relates to at least two of our
measurement variables.
A factor is a linear combination of variables. It is a construct that is not directly
observed but that can be explained with the help of other variables.
We want to estimate the common factors that contribute to the variance in our
variables.

Examining the correlation among the survey items reveals that

there is significant overlap among various subgroups of items
 With factor analysis, we can investigate the number of underlying
factors and, in many cases,we can identify what the factors
represent conceptually.

We can compute factor scores for each respondent, which can then
be used in subsequent analyses.
• For example, suppose that a bank asked a large
number of questions about a given branch.
Consider how the following characteristics might
be more parsimoniously represented by just a
few constructs (factors).

Benefits include: (1) a more concise representation of the

marketing situation and hence communication may be
enhanced; (2) fewer questions may be required on future
surveys; and, (3) perceptual maps become feasible.

- Ideally, interval data (e.g., a rating on a 7 point scale),

regarding the perceptions of consumers are required
regarding a number of features, such as those noted above
for the bank are gathered.
1. To start with Analyze …Data Reduction … Factor

1. The following dialogue box is seen. Transfer all the variables under consideration
for Factor analysis to the box ‘Variables’.Factor analysis has no IVs and DVs, so
everything you want to get factors for just goes into the list labeled “variables.” In
this case, it’s all the first 11 variables. In some datasets, there is also a dummy
“subject number” variable included. Be sure that you don’t include subject number
as one of the variables for factor analysis.
2. To do a factor analysis, we need to select an “extraction method” and a “rotation
method.” Hit the “Extraction” button to specify your extraction method.
The principal components analysis is the most commonly used extraction method.
Other factor extraction methods include:
a. Maximum likelihood method
b. Principal axis factoring
c. Alpha method
d. Unweighted lease squares method
e. Generalized least square method
f. Image factoring.
In principal components analysis, linear combinations of the observed
variables are formed.
The 1st principal component is the combination that accounts for the largest
amount of variance in the sample (1st extracted factor).
The 2nd principle component accounts for the next largest amount of
variance and is uncorrelated with the first (2nd extracted factor).
Successive components explain progressively smaller portions of the total
sample variance, and all are uncorrelated with each other.
3. Next, Factor rotation.
In this step, factors are rotated.
Un-rotated factors are typically not very interpretable (most factors are
correlated with many variables).
Factors are rotated to make them more meaningful and easier to interpret
(each variable is associated with a minimal number of factors).

Different rotation methods may result in the identification of somewhat

different factors.

The most popular rotational method is Varimax rotations.

Varimax use orthogonal rotations yielding uncorrelated factors/components.
Varimax attempts to minimize the number of variables that have high
loadings on a factor. This enhances the interpretability of the factors.
Other common rotational method used include Oblique rotations which
yield correlated factors.
Oblique rotations are less frequently used because their results are more
difficult to summarize.
Other rotational methods include:
Quartimax (Orthogonal)
Equamax (Orthogonal)
Promax (oblique)

4. Also we can save Factor scores as variables along with the data set.
 5. For better understanding the factor loadings may be arranged by size.

KMO a nd Bartlett's Te st
Kaiser-Mey er-Olkin Measure of Sampling
Adequacy. .596

Bartlet t's Test of Approx . Chi-Square 7390.477

Sphericity df 55
Sig. .000

Bartlett Test of Sphericity:

It test the null hypothesis that all the correlation between the variables is Zero. If the
correlation matrix is an identity matrix then there is no use of factor analysis.If the
value of the test statistic for sphericity is large and the associated significance level is
small, it is unlikely that the population correlation matrix is an identity.
If the hypothesis that the population correlation matrix is an identity cannot be
rejected because the observed significance level is large, the use of the factor model
should be reconsidered.

Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy.

This test checks the adequacy of data for running the factor analysis. The value of
KMO ranges from 0 to 1. The larger the value of KMO more adequate is the sample
for running the factor analysis. Kaiser recommends accepting values greater than 0.5
as acceptable.

The closer the KMO measure to 1 indicate a sizeable sampling adequacy (As a rule of
thumb .8 and higher are great, .7 is acceptable, .6 is mediocre, less than .5 is
unacceptable ).
Reasonably large values are needed for a good factor analysis. Small KMO values
indicate that a factor analysis of the variables may not be a good idea.

Comm una litie s

Initial Ex trac tion

X1 -- Try New A nd
1.000 .908
Different Things
X2 -- P arty Pers on 1.000 .634
X3 -- P eople Come to Me 1.000 .939
X4 -- A void Fried Foods 1.000 .837
X5 -- Likes to Go Out
1.000 .857
Socially
X6 -- Friends Come to Me 1.000 .915
X7 -- S elf-Confident 1.000 .218
X8 -- E at B alanced,
1.000 .878
Nutritious Meals
X9 -- B uy New P roducts 1.000 .711
X10 -- Careful A bout What
1.000 .750
I E at
X11 -- Try New Brands 1.000 .904
Ex trac tion Method: Principal Component Analysis .

Communalities indicate the amount of variance in each variable

that is accounted for.
Initial Communalities are estimates of the variance in each variable accounted for by all
components or factors.
For principal components analysis, this is always equal to 1.0

ExExtraction Communalities are estimates of the variance in each variable

accounted for by the factors (or components) in the factor solutiontraction
Communalities are Extraction Com
Small values indicate variables that do not fit well with the factor solution, and should
possibly be dropped from the analysis.

f the variance in each variable accounted for by the factors (or components) in
the factor solution.
 estio
Total Variance Explained

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative %
1 3.128 28.438 28.438 3.128 28.438 28.438 2.686 24.416 24.416
2 2.441 22.190 50.628 2.441 22.190 50.628 2.491 22.644 47.060
3 1.889 17.176 67.804 1.889 17.176 67.804 2.227 20.242 67.303
4 1.094 9.943 77.747 1.094 9.943 77.747 1.149 10.445 77.747
5 .969 8.811 86.558
6 .558 5.076 91.634
7 .382 3.476 95.109
8 .267 2.428 97.538
9 .166 1.506 99.044
10 .071 .642 99.686
11 .035 .314 100.000
Extraction Method: Principal Component Analysis.
f
This table shows you the actual factors that were extracted.
In this case, there were four factors with eigenvalues greater than1. SPSS always
extracts as many factors initially as there are variables in the dataset, but the restof
these didn’t make the grade. The “% of variance” column tells you how much of the
totalvariability (in all of the variables together) can be accounted for by each of these
summary scalesor factors. Factor 1 accounts for 24.416% of the variability in all 11
variables, and so on.

The eigenvalue is a measure of how much of the variance of the observed variables a
factor explains. Any factor with an eigenvalue ≥1 explains more variance than a single
observed variable.

The factors that explain the least amount of variance are of little use and are generally
discarded. Deciding how many factors are useful to retain will be the subject of
another post.
For the initial solution, there are as many components or factors as
there are variables.

The numbers under “Total” gives the Amount of variance in the observed variables
accounted for by each component or factor
The percent of variance accounted for by each specific factor or component, relative to the
total variance in all the variables.
Component Matrixa

Component

1 2 3 4

X8 -- Eat Balanced,
-.810 .114 .452 -.077
Nutritious Meals
X4 -- Avoid Fried Foods -.806 .189 .381 .078
X9 -- Buy New Products .692 .386 .266 .108
X10 -- Careful About What I
-.665 .127 .541 -.007
Eat
X2 -- Party Person .583 -.249 .357 .323
X11 -- Try New Brands .379 .773 .379 -.142
X6 -- Friends Come to Me .324 -.744 .466 -.199
X3 -- People Come to Me .261 -.721 .529 -.267
X1 -- Try New And Different
.492 .670 .463 -.051
Things
X7 -- Self-Confident -.033 -.142 .421 .141
X5 -- Likes to Go Out
-.055 -.160 .130 .901
Socially

Extraction Method: Principal Component Analysis.

a. 4 components extracted.

This table reports the factor loadings for each variable on the
unrotated components or factors.
Each number represents the correlation between the item and the
unrotated factor.

Correlations can help you formulate an interpretation of the factors

or components.This is done by looking for a common thread among
the variables that have large loadings for a particular factor or
component.

IIf many have large loadings, a better view can be obtained through
 Rotation
s, a better vie

Scree Plot

2
Eigenvalue

1 2 3 4 5 6 7 8 9 10 11

Component Number

Analysis weighted by X26 -- Price

__

5. The examination of the Scree plot provides a visual of the total variance
associated with each factor.
The steep slope shows the large factors.
The gradual trailing off (scree) shows the rest of the factors usually lower than an
Eigen value of 1.
In choosing the number of factors, in addition to the statistical criteria, one
should make initial decisions based on conceptual and theoretical grounds.

Rotated Component Matrixa

Component
1 2 3 4
X8 -- Eat Balanced,
.927 -.117 -.029 -.061
Nutritious Meals
X4 -- Avoid Fried Foods .892 -.104 -.158 .068
X10 -- Careful About What
.864 .009 .046 .031
I Eat
X1 -- Try New And
.001 .953 -.012 -.019
Different Things
X11 -- Try New Brands .064 .926 -.149 -.143
X9 -- Buy New Products -.328 .757 .087 .149
X3 -- People Come to Me -.021 -.090 .963 -.058
X6 -- Friends Come to Me -.114 -.106 .944 .004
X2 -- Party Person -.310 .298 .499 .448
X7 -- Self-Confident .240 .088 .317 .228
X5 -- Likes to Go Out
.063 -.108 -.027 .917
Socially
Extraction Method: Principal Component Analys is.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
 Rotated Component Matrix(a)

Component
1 2 3 4
X8 -- Eat Balanced,
Nutritious Meals .927 -.117 -.029 -.061
X4 -- Avoid Fried Foods .892 -.104 -.158 .068
X10 -- Careful About What
I Eat .864 .009 .046 .031
X1 -- Try New And
Different Things .001 .953 -.012 -.019
X11 -- Try New Brands .064 .926 -.149 -.143
X9 -- Buy New Products -.328 .757 .087 .149
X3 -- People Come to Me -.021 -.090 .963 -.058
X6 -- Friends Come to Me -.114 -.106 .944 .004
X2 -- Party Person -.310 .298 .499 .448
X7 -- Self-Confident .240 .088 .317 .228
X5 -- Likes to Go Out
Socially .063 -.108 -.027 .917

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 5 iterations.

Finally, the Rotated Component Matrix shows you the factor loadings for each
variable.
Each number represents the partial correlation between the item and the rotated
factor.
These correlations can help you formulate an interpretation of the factors or
components.
This is done by looking for a common thread among the variables that have large
loadings for a particular factor or component.

--The first 3 subtests loaded strongly on Factor 1, which we’ll call “Health
Consciousness”
--The next three all loaded strongly on Factor 2, which we’llcall “Innovation”
--The next four loaded strongly on Factor 3, which we will call “Opinion Leader”.
--And the last one, “Socializing”.