An accountancy firm would like to establish groups of similar taxation policies based on a database they have populated. They are faced with Kaiser's criterion for retaining factors. What rule should they follow for retaining factors?
A) Retain any factor with an eigenvalue greater than 0.7.
B) Retain any factor with an eigenvalue greater than 1.
C) Retain factors before the point of inflexion on a scree plot.
D) Retain factors with communalities greater than 0.7.

Question

Quizplus · Accepted Answer

Kaiser's criterion suggests retaining any factor with an eigenvalue greater than 1. This rule is based on the idea that a factor should be able to explain more variance than a single variable to be considered significant.

An Accountancy Firm Would Like to Establish Groups of Similar