Hi,
I have a quick question on
creating a composite index. I've searched for this topic on Stata
listserv, but without success.
But, anyways, here is my
situation:
I have the following three
variables:
Variable "A"
(Scale: millions; range: from hundreds of thousands to millions; Unit: dollar)
Variable "B"
(Scale: hundreds; Range: from single digits to three double digits; Unit:
"size")
Variable "C"
(Scale: hundreds; Range: from less than ten to tens of thousands; Unit: personnel)
I would like to have equal
weights attached for each variable that will comprise the composite index (I
may use weighted index later on, depending on how my theory works out). This
would seem accomplished easily enough via "generate" command with
relevant math syntax.
Although the data is
noticeably non-normal, this may be remedied via some type of log
transformation. And, the issue with the different scales may also be addressed
via requisite transformation.
But the problem with
differences in units still seems to pose a problem. Can anyone recommend some
way out of this, so that an index can be constructed? Of course, corollary
advice on the command structure would also be helpful.
An additional note: I am not
sure if a factor analysis approach would also work, since a cursory exam of the
data does not suggest a high level of positive correlation between variable C
and the other two variables (although there does seem to be a high positive
correlation between variables B and C). I am also reluctant to go with just a
two-indicator factor.
Any feedback would be
greatly appreciated. Much thanks.
Joon.
