Munich Personal RePEc Archive

Factor analysis with a single common factor

Chen, Siyan and Desiderio, Saul (2018): Factor analysis with a single common factor.

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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.

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