Comparing a new algorithm with the classic methods for estimating the number of factors
β Scribed by Ronald C. Henry; Eun Sug Park; Clifford H. Spiegelman
- Publisher
- Elsevier Science
- Year
- 1999
- Tongue
- English
- Weight
- 80 KB
- Volume
- 48
- Category
- Article
- ISSN
- 0169-7439
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β¦ Synopsis
This paper presents and compares a new algorithm for finding the number of factors in a data analytic model. After we describe the new method, called NUMFACT, we compare it with standard methods for finding the number of factors to use in a model. The standard methods that we compare NUMFACT with are Malinowski's indicator function, Wold's cross-Ε½ . validation approach, Bartlett's test, scree plots, the rule-of-one, and using the number of factors eigenvectors needed to explain 90% of the trace of a correlation matrix. Using a diverse set of real applications, NUMFACT is shown to be the clear method of choice.
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