re: st: -factor- with binary variables

[Bill Magee <magee@chass.utoronto.ca>]

In addition to tetrachoric correlation coefficient, I have read about:
The Phi Correlation Coefficient, which  is designed to measure the 
degree of relation for two variables which are binary (each has only 
two values --- also called dichotomous).
To compute you first convert your two binary variable into 1's and 0's, 
and then follow the procedure for Pearson correlation. 
(http://forrest.psych.unc.edu/research/vista-frames/others.html)

From what I recall, if the proportions coded 1.0 and 0 are close in the 
40-60% range, phi performs ok.
The use of the tetrachoric implies assumption of underlying 
(unassessed) normal distribution.  I don't know if there are cases 
where the phi would outperform the tetrachoric (or on what standards 
one would evaluate performance) if the tetrachoic assumptions were 
wrong, but I would be interested in knowing...

bill magee