A consultant has asked you to distinguish between factor analysis and principal component analysis. What is the latter most commonly used for?
A) To summarize data whilst retaining maximum variance.
B) To summarize data whilst retaining minimum variance.
C) To derive as few factors as possible.
D) To derive as many solutions as possible.

Question

Quizplus · Accepted Answer

Factor analysis and principal component analysis are both techniques used for data reduction and summarization. However, factor analysis aims to identify underlying factors that explain the correlations among a set of observed variables, while principal component analysis aims to extract the maximum amount of variance from the original variables and condense it into fewer components. Therefore, the correct answer is (A) To summarize data whilst retaining maximum variance.

A Consultant Has Asked You to Distinguish Between Factor Analysis