A multivariate method in which the basic data consist of the observed values of the p characteristics of each of n individuals. The method, introduced in 1931 by Thurstone, aims to explain the p×p variance–covariance matrix for these data in terms of the relationships between a much smaller number (q) of unobserved variables (latent variables) called factors. The underlying proposition is that the jth observed value, xj, is the sum of a linear combination of the factors f1, f2,…, fq and an error term, εj,:![factor analysis](Images/oree/doc/10.1093/acref/9780199679188.001.0001/acref-9780199679188-math-0216-full.gif)
The multipliers λj1, λj2,…, λjq are called factor loadings.
Unlike principal components analysis, which it resembles, the methodology makes many assumptions (for example, that factors exist and that there are exactly q of them). Its use has therefore attracted considerable criticism. Its popularity might be thought to be based on the ability of the method to produce the result desired by the researcher!