Quantitative Techniques in Business

Research

Data Analysis
• Multivariate Analysis often starts out with
data involving a substantial number of
correlated variables
 Principal Component Analysis
• Principal Component Analysis (PCA)is a
dimension-reduction tool that can be used to
reduce a large set of variables to a small set
that still contains most of the information in
the large set.
• Factor analysis is a statistical procedure to
identify interrelationships that exist among a
large number of variables, i.e., to identify how
suites of variables are related.
• Factor analysis can be used for exploratory or
confirmatory purposes.
 Factor loadings
• The factor loadings, also called component
loadings in PCA, are the correlation
coefficients between the variables (rows) and
factors/items (columns).
• VARIMAX: One of the most popular
orthogonal factor rotation methods.
 Structural Equation Model (SEM)
• Structural equation modeling (SEM) is a form of causal modeling that
includes a diverse set of mathematical models, computer algorithms, and
statistical methods that fit networks of constructs to data. SEM
includes confirmatory factor analysis and path analysis.
• SEM, is a very general statistical modeling technique, which is widely used
in the behavioral sciences.
• SEM is a powerful technique that can combine complex path models with
latent variables (factors).
• It can be viewed as a combination of factor analysis
and regression or path analysis.
• Structural equation modeling has its roots in path
analysis
• Observed (or measured) variables are represented by
a rectangle or square box, and latent (or
unmeasured) factors by a circle or ellipse.
• Single headed arrows or ‘paths’ are used to define
causal/associational relationships in the model, with
the variable at the tail of the arrow
causing/associating the variable at the point.
• Double headed arrows indicate co-variances or
correlations, without a causal/associational
interpretation.
• Statistically, the single headed arrows or paths
represent regression coefficients, and double-
headed arrows co-variances.
 Structural Equation
Model (SEM)

Show potential causal/association

dependencies between dependent Show the relations between latent
and independent variables variables and their indicators

Measurement
Structural model Model

Path Diagram Exploratory Confirmatory

factor analysis factor analysis

Assessment of model and model fit

Assessment of model and model fit
• 1. Goodness of fit index (GFI)
• 2. Adjusted goodness of fit index (AGFI)
• 3. Normed fit index (NFI)
• 4. Incremental fit index (IFI)
• 5. Comparative fit index (CFI)
• 6. Relative fit index (RFI)
• 7. Tucker-Lewis index (TLI)
 CMIN
• Centro Materno Infantil do Norte
• CMIN/DF or χ2/df
• <5 is acceptable (Carmines and McIver, 1981, page
80)
• a ratio > 2.00 represents an inadequate fit." (Byrne,
1989, p. 55).
• Different researchers have recommended using
ratios as low as 2 or as high as 5 to indicate a
reasonable fit." (Marsh & Hocevar, 1985).
 Degree of Freedom
• Before we can proceed we need to know how
many degrees of freedom we have. When a
comparison is made between one sample and
another, a simple rule is that the degrees of
freedom equal (number of columns minus
one) x (number of rows minus one) not
counting the totals for rows or columns. For
our data this gives (2-1) x (2-1) = 1.
Exploratory/Confirmatory Factor Analysis
• Factor Loadings
• Cross Loadings
 Reliability and Validity
• Reliability- Cronbach's Alpha
• Convergent/construct Validity
– Average variance extracted (AVE)
– Composite reliability (CR)
• Discriminant Validity
– square-root of the AVE > correlation coefficient
– Cross-loading
 Final Syllabus
• What is SEM? Why we use SEM technique? Benefit of using SEM?
• Difference between structural model and Measurement model
• Difference between Conceptual model and theoretical model?
• What is Principle of Component Analysis? Factor analysis? CFA/EFA– why
we use Factor analysis?
• How we can assess the model fit? Briefly discuss the indicator/indices with
threshold values..
• Differentiate between reliability and validity?
• Descriptive statistics? Correlation? Regression?
• Why we use control variable in the model? elaborate examples?
• Discriminant validity/convergent validity in details