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Prediction and sufficiency in the model factor analysis

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  • Abul Naga, Ramses H.

Abstract

We contrast two approaches to the prediction of latent variables in the model of factor analysis. The likelihood statistic is a sufficient statistic for the unobservables when sampling arises from the exponential family of distributions. Linear predictors, on the other hand, can be obtained as distribution-free statistics. We provide conditions under which a class of linear predictors is sufficient for the exponential family of distributions. We also examine various predictors in the light of the following criteria: (I) sufficiency, (ii) mean-square error, and (iii) unbiasedness and illustrate our results with the help of Chinese data on living standards.

Suggested Citation

  • Abul Naga, Ramses H., 1997. "Prediction and sufficiency in the model factor analysis," LSE Research Online Documents on Economics 6597, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6597
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    File URL: https://researchonline.lse.ac.uk/id/eprint/6597/
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    Cited by:

    1. Riccardo Massari, 2005. "A Measure of Welfare Based on Permanent Income Hypothesis: An Application on Italian Households Budgets," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 55-92, September.

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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