If the variables are standardized, the factor model may be presented as . A) X_i= A_i1F₁+ A_i2F₂+ A_i3F₃+ ... + A_imF_m+ V_iU_i B) F_i= W_i1X₁+ W_i2X₂+ W_i3X₃+ ... + W_imX_m+ V_iU_i C) X_i= W_i1F₁+ W_i2F₂+ W_i3F₃+ ... + W_imF_m+ V_iU_i D) ^Xi ⁼^Ai1 ^F1 ⁺^Ai2 ^F2 ⁺^Ai3 ^F3 + ... + ^Aim ^Fm

Question

Quizplus · Accepted Answer

When the variables are standardized, the factor model can be presented as X_i= A_i1F₁+ A_i2F₂+ A_i3F₃+ ... + A_imF_m+ V_iU_i. This is because the standardized variables have a mean of 0 and a standard deviation of 1, which makes the factor loadings directly comparable.

If the Variables Are Standardized, the Factor Model May Be