# Re: st: RE: Factor analysis and dummy variables.

 From [email protected] To [email protected] Subject Re: st: RE: Factor analysis and dummy variables. Date Fri, 10 Dec 2004 13:05:11 -0500

```Thanks to Nick and Mark for their inputs.

Mark, the polychoric and polychoricpca are running forever.
Is there a better way to do this?

Nick,
Unfortunatelly, he left for the weekend.

But basically, in his reasonning, the PCA is reserved for continuous
variables while the MCA is reserved for dummy variables. In the same
idea, categorical variables (more than two responses) are to be used
with PCA.

He is a statistician, I am not. I know very few of factor analysis. My little
understanding is that it creates a common factor from a dispersion in
varlist.

My problem is that I want to create an asset index.

factor radio tv frige bike moto car , pcf factor(5)
score wealthindex

xtile wealthgroup5 = wealthindex, nq(5)

The score I obtain after the factor is of poor quality since I do not have a
homogenous
distribution (i.e. approx 20%) of wealthgroup5 subgroups. I have the same
problem with
or without weights.

Any clue what is the best solution?

Many thanks.

"Nick Cox"
<[email protected]>           To:       <[email protected]>
Sent by:                         cc:
owner-statalist@hsphsun2.        Subject:  st: RE: Factor analysis and dummy variables.
harvard.edu

12/10/2004 12:42 PM
statalist

What did your colleague say was the
reason for it being "wrong"? What
a "best command"?

Nick
[email protected]

[email protected]

> I know this question has been asked several times, but it's
>
> Is it right to perform PCA analysis with dummy (0/1) variables?
>
> I used to code :
>
> factor radio tv frige bike moto car , pcf factor(5)
>
> where radio tv ... are dummy (0/1),
>
> but a colleague just told me I am wrong.
>
> A MCA in his mind is better.
>
> What is the best command in that case? Just to make sure.
>

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```