Dictionary:Factor analysis

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A method of finding a mathematical relationship among values. Assume that a set of observations can be accounted for by a set of linear relationships involving the factors


where

where is an error term (also called the specific factor). Factor analysis (also called multivariant analysis) is a method of finding the parameters . Application usually begins with a learning set, a data subset used to establish correlations between observations and the factors being determined, and then proceeds to a predicting set, where the relations are used for predicting the factors associated with additional observations.