Comparing a new algorithm with the classic methods for estimating the number of factors Academic Article uri icon

abstract

  • 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-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.

altmetric score

  • 3

author list (cited authors)

  • Henry, R. C., Park, E. S., & Spiegelman, C. H.

citation count

  • 66

publication date

  • June 1999