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A new approach for selecting the number of factors

  • Chen, Yin-Ping
  • Huang, Hsin-Cheng
  • Tu, I-Ping
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    In factor analysis, it is critical to determine the number of factors. A new approach to select the number of factors based on unbiased risk estimation is introduced. This approach utilizes a concept, called generalized degrees of freedom (GDF), originally proposed for model selection in regression. A data perturbation technique is applied for estimating GDF. Simulation experiments show that the proposed method performs better than some commonly used methods.

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    File URL: http://www.sciencedirect.com/science/article/B6V8V-4XHM12G-1/2/20e8acaf3b4e7e38b58b52200d03fa98
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    Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

    Volume (Year): 54 (2010)
    Issue (Month): 12 (December)
    Pages: 2990-2998

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    Handle: RePEc:eee:csdana:v:54:y:2010:i:12:p:2990-2998
    Contact details of provider: Web page: http://www.elsevier.com/locate/csda

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    1. Louis Guttman, 1954. "Some necessary conditions for common-factor analysis," Psychometrika, Springer, vol. 19(2), pages 149-161, June.
    2. Hirotugu Akaike, 1987. "Factor analysis and AIC," Psychometrika, Springer, vol. 52(3), pages 317-332, September.
    3. Wim Krijnen, 2006. "Convergence of Estimates of Unique Variances in Factor Analysis, Based on the Inverse Sample Covariance Matrix," Psychometrika, Springer, vol. 71(1), pages 193-199, March.
    4. Dhrymes, Phoebus J & Friend, Irwin & Gultekin, N Bulent, 1984. " A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 39(2), pages 323-46, June.
    5. Henry Kaiser, 1958. "The varimax criterion for analytic rotation in factor analysis," Psychometrika, Springer, vol. 23(3), pages 187-200, September.
    6. Huang, Hsin-Cheng & Chen, Chun-Shu, 2007. "Optimal Geostatistical Model Selection," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 1009-1024, September.
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