Hands-on Tutorial
The Factor Analysis for Constructing a Composite Index
Create an education index from Indonesia’s Central Statistics Agency data 2020
Policymakers are required to formulate comprehensive policies and be able to assess the areas that need improvement. Using the composite index, the indicators are aggregated and each area can be ranked to create an evaluation
The idea behind the Factor Analysis (FA)
Factor analysis is a linear statistical model that aims to describe a set of m variables in terms of a smaller number of p factors and to highlight the relationship between these variables. Factor analysis is similar to Principal Component Analysis (PCA).
The factor analysis helps the analyst to make an interpretation among the variables in the data into a set of factors. Factors consist of one or several variables with certainly explained variances. It is commonly used in market research, advertising, etc.
Learn more about factor analysis to get the detailed formula and concept
