Menu
Home
People
Places
Arts
History
Plants & Animals
Science
Life & Culture
Technology
Reference.org
Factor analysis
open-in-new
<p>Factor analysis is a <a href="/facts/Statistics/DNPsKGYU">statistical</a> method used to describe <a href="/facts/Variance/ULBJKXD1">variability</a> among observed, correlated <a href="/facts/Variable_(mathematics)/VbQlrvKz">variables</a> in terms of a potentially lower number of unobserved variables called factors. For example, it is possible that variations in six observed variables mainly reflect the variations in two unobserved (underlying) variables. Factor analysis searches for such joint variations in response to unobserved <a href="/facts/Latent_variable/ohg99BnW">latent variables</a>. The observed variables are modelled as <a href="/facts/Linear_combination/CVjL6kuN">linear combinations</a> of the potential factors plus "<a href="/facts/Errors_and_residuals_in_statistics/Ef0LgAS4">error</a>" terms, hence factor analysis can be thought of as a special case of <a href="/facts/Errors-in-variables_models/PRDddry0">errors-in-variables models</a>. </p><p>Simply put, the factor loading of a variable quantifies the extent to which the variable is related to a given factor. </p><p>A common rationale behind factor analytic methods is that the information gained about the interdependencies between observed variables can be used later to reduce the set of variables in a dataset. Factor analysis is commonly used in <a href="/facts/Psychometrics/56X26MDI">psychometrics</a>, <a href="/facts/Personality/zdkhBU5V">personality</a> psychology, biology, <a href="/facts/Marketing/LttVQ66t">marketing</a>, <a href="/facts/Product_management/JS4ApjpD">product management</a>, <a href="/facts/Operations_research/H5yJkV5n">operations research</a>, <a href="/facts/Finance/fLh1GgN8">finance</a>, and <a href="/facts/Machine_learning/e0w0XJTu">machine learning</a>. It may help to deal with data sets where there are large numbers of observed variables that are thought to reflect a smaller number of underlying/latent variables. It is one of the most commonly used inter-dependency techniques and is used when the relevant set of variables shows a systematic inter-dependence and the objective is to find out the latent factors that create a commonality. </p>