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Factor analysis with a single common factor

Author

Listed:
  • Chen, Siyan
  • Desiderio, Saul

Abstract

In this paper we present a simple approach to factor analysis to estimate the true correlations between observable variables and a single common factor. We first provide the exact formula for the correlations under the orthogonality conditions, and then we show how to consistently estimate them using a random sample and a proper instrumental variable.

Suggested Citation

  • Chen, Siyan & Desiderio, Saul, 2018. "Factor analysis with a single common factor," MPRA Paper 90426, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90426
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    File URL: https://mpra.ub.uni-muenchen.de/90426/1/MPRA_paper_90426.pdf
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    Cited by:

    1. Ewa Szafraniec-Siluta & Agnieszka Strzelecka & Roman Ardan & Danuta Zawadzka, 2024. "Determinants of Financial Security of European Union Farms—A Factor Analysis Model Approach," Agriculture, MDPI, vol. 14(1), pages 1-19, January.

    More about this item

    Keywords

    Factor analysis; correlation; instrumental variable estimation;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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