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Chapter 16

Determining the Number

of Factors in Exploratory
and Confirmatory
Factor Analysis
Rick H. Hoyle

Jamieson L. Duvall

R
esearchers in the social sciences are interested association are conveyed in matrices of covariances
in the unobserved, or latent, variables that are or correlations, and to the extent that the associations
causes or consequences of the behaviors they among the observed variables are near zero when the
observe. Latent variables such as attitudes, feelings, influence of the factors is taken into account, the factors
and motives are valuable because, in the context of a provide a parsimonious account of reliable variance
well-reasoned theory, they have the potential to explain in the observed variables without significant loss of
a wide array of behavioral processes using a relatively information.
small number of constructs. Moreover, they bring rich- The primary statistical tool for drawing such infer-
ness and detail to theoretical accounts of behaviors that ences is factor analysis. The aim of factor analysis is
are not adequately described by observable influences. to describe the associations among a potentially large
These latent variables, or factors, typically are number of observed variables, or indicators, using a
inferred from patterns of association among sets of relatively small number of factors. It is assumed that
observed variables believed to be caused, at least the indicators are fallible in their representation of the
in part, by one or more factors.1 The patterns of underlying factor. That is, a portion of the variability in
observed scores on each indicator is shared with other
indicators of the factor, whereas a portion is, with ref-
1 The material presented in this chapter is not relevant for factor
erence to the factor, unique to the indicator. In theory,
models in which the latent variable is presumed to be caused
by the indicators. In such models, the indicators are referred the uniqueness component can further be decomposed
to as cause indicators (Bollen & Lennox, 1991) or formative into variability attributable to other factors, specificity,
indicators (Cohen, Cohen, Teresi, Marchi, & Velez, 1990). and variability attributable to random fluctuation,

AUTHORS’ NOTE: Correspondence should be addressed to Rick H. Hoyle, Department of Psychology: SHS, Box 90085, Duke
University, Durham, NC 27708–0085. Send electronic mail to rhoyle@[Link].
301
302 • SECTION V/MODELS FOR LATENT VARIABLES

error. In practice, this decomposition is possible only to The λs are, in effect, regression coefficients that
the extent that the data matrix includes other indicators index the degree to which variance in the indicator
manifesting the same specificity, or covariates that are shared with the other indicators (i.e., its communality)
associated with the specific component (i.e., specific is explained by each of the k factors.2
effects) (Bentler, 1990b). A significant drawback to exploratory factor
A fundamental concern in applications of factor analysis is the indeterminacy of the estimates of the λs
analysis is the determination of how many factors are and δs. That is, the λs and δs (as well as the variances of
necessary to adequately account for the commonality and covariances between the factors) are not uniquely
among the indicators in a set. Despite the fact that this determined by the observed data. In theory, there exist
concern received considerable attention from quanti- an infinite number of solutions to the measurement
tative methodologists in the 1950s and 1960s (e.g., equations that would be equally consistent with the
Cattell, 1966; Guttman, 1954; Horn, 1965), a half observed data. Indeed, it is possible to derive equally
century later, it remains a topic of considerable debate valid solutions that imply factors that are scarcely cor-
(e.g., Bollen, 2000; Hayduk & Glaser, 2000; Herting & related (Steiger, 1996). This mathematical property of
Costner, 2000; Mulaik & Millsap, 2000) and, judging solutions generated by exploratory factor models stems
from published applications of factor analysis, still is from the fact that, as typically specified, such models
poorly understood by social and behavioral scientists require estimation of more unknowns, or free param-
(Fabrigar, Wegener, MacCallum, & Strahan, 1999). eters, than there are observed data.3 This is a concern
In this chapter, we review five procedures for deter- about degrees of freedom that attends all forms of sta-
mining the number of factors in a factor analysis. Three tistical inference, and it gives rise to the inferential
apply exclusively to exploratory factor analysis, one problem that such models cannot be disconfirmed.
applies either to exploratory or confirmatory factor The solution to both the indeterminacy and inability-
analysis, and one applies exclusively to confirmatory to-disconfirm problems is to impose constraints on the
factor analysis. We demonstrate that the two proce- measurement equations by fixing a subset of the λs
dures used most frequently by substantive researchers to a specific value. Often. this value is zero, which
frequently lead to incorrect inferences regarding the represents the hypothesis that the ξ does not contribute
number of factors underlying a set of indicators. We to the common variance in the variable. For instance,
illustrate the application of, and compare results from, expanding the measurement equations presented ear-
the three remaining procedures in a factor analysis lier for the case of six indicators (p = 6), we might
of a widely used self-report measure known to be impose the following constraints:
factorially complex.
X1 = λ11 ξ1 + 0ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ1 ,
X2 = λ21 ξ1 + 0ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ2 ,
16.1. Exploratory and
X3 = λ31 ξ1 + 0ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ3 ,
Confirmatory Factor Models
X4 = 0ξ1 + λ42 ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ4 ,
In exploratory factor analysis (i.e., principal axis,
X5 = 0ξ1 + λ52 ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ5 ,
common factors), each of the p observed variables,
Xi , is modeled as a linear combination of k factors, X6 = 0ξ1 + λ62 ξ2 + 0ξ3 + 0ξ4 + 0ξ5 + 0ξ6 + δ6 .
ξ1 , ξ2 , . . . , ξk , and a uniqueness component, δi . The
model can be expressed as a series of measurement The particular set of constraints imposed on these
equations: equations yields a two-factor model (k = 2) with
a simple structure pattern of loadings. By fixing all


k
X1 = λ1j ξj + δ1
j =1 2 The term exploratory factor analysis, as used in this chapter, does not

k encompass principal components analysis.
X2 = λ2j ξj + δ2 3 The factor indeterminacy problem can be characterized in other ways
j =1 and is substantially more complex than described here. A thoroughgoing
presentation of the problem is beyond the scope of the chapter. Readers
... interested in greater detail would benefit from reading the historical review


k chapter by Steiger and Schönemann (1978). Readers interested in current
Xm = λmj ξj + δm . thinking about the factor indeterminacy problem, from both mathematical
and philosophical perspectives, would benefit from reading a series of
j =1
articles published in Volume 31 of Multivariate Behavioral Research.
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 303

of the λs for ξ3 , ξ4 , ξ5 , and ξ6 to zero, we have δs). By allowing indicators to load on more than one
posited that two factors are sufficient to explain the factor or selected error terms to covary, researchers
commonality among the indicators. Moreover, by often can obtain acceptable statistical fit of the model
fixing the λs to zero for ξ2 in the first three equations to the data. By limiting the search for misspecifi-
and ξ1 in the last three equations, we have posited a cation to these options, researchers fail to consider
model with no factorially complex indicators. Impor- the possibility that their model is misspecified in a
tantly, we have reduced the number of unknowns in this more fundamental way: It posits too many or too
set of equations from 42 (36 λs and 6 λs) to 12 (6 λs few factors. When faced with a misspecified con-
and 6 δs).4 Each zero in the measurement equations is a firmatory factor model, the researcher must address
disconfirmable hypothesis, and the collection of zeroes the same question that attends all applications of
and free parameters constitutes a disconfirmable model exploratory factor analysis: How many factors are
of the underlying causes of X1 to X6 . required to adequately explain variance shared by the
It is important to appreciate that we have ven- indicators?
tured two hypotheses by imposing this set of con- In the remainder of this section, we review five
straints. The first, and most fundamental, is that strategies for addressing the number-of-factors ques-
k = 2. The second is that, given that k = 2, tion in applications of factor analysis. The first
three indicators are exclusively caused by ξ1 , and two—the Kaiser-Guttman (K-G) rule and the scree
three are exclusively caused by ξ2 . It is this first plot—apply exclusively to exploratory factor analysis,
hypothesis, that k equals a specified number, that is involve evaluating the latent roots of the correla-
the concern of the remainder of this chapter. For, tion matrix, and are the overwhelming favorites of
as should be apparent from this example, if that researchers in the social sciences. We argue that
hypothesis is refuted, then any hypothesis regard- these strategies are problematic and should not be
ing the pattern of loadings on the factors is prema- used. The other three—parallel analysis, maximum
ture. In short, a fundamental decision that attends likelihood exploratory factor analysis, and the unre-
any application of factor analysis is how many fac- stricted factor model—are less subjective, statistically
tors to retain, in the case of exploratory factor sound, and more accurate. Although parallel analysis
analysis, or specify, in the case of confirmatory factor is relevant only for applications of exploratory factor
analysis. analysis, we demonstrate that maximum likelihood
estimation of common factors and the unrestricted
confirmatory factor model are equivalent approaches
to determining the number of factors in applica-
16.2. Strategies for Determining tions of exploratory and confirmatory factor analysis,
the Number of Factors respectively.

Traditionally, the question of how many factors under-

lie a set of indicators has been viewed as an issue in
16.2.1. K-G Rule
applications of exploratory factor analysis but not a
concern in applications of confirmatory factor analysis. In a seminal paper on the determination of how many
For instance, if, upon evaluating the fit of a confirma- factors are necessary to account for the commonality
tory factor model, a researcher determines that there is among a set of indicators, Guttman (1954), concerned
an unacceptable degree of misspecification (i.e., the that investigators frequently retained too few factors,
model does not fit), the typical focus of respecifi- proposed three rules for determining the minimum
cation is on either the zero constraints imposed on number of factors to retain. Ironically, the rule that
the factor loadings (the λs) or the zero constraints Guttman found least satisfactory, “latent root greater
imposed on the covariances between error terms (the than or equal to unity,” became the rule of choice
for applied researchers. The popularity of this rule
can be traced to Kaiser (1960). Kaiser found that the
4 Our discussion here does not require that we discuss constraints that could
rule favored by Guttman frequently indicated more
be put on δ , which, in addition to the δs, includes the covariances between
them, and , which is the variance-covariance matrix for the factors. For than half as many factors as variables, whereas the
instance, the zero constraints on all λs for ξ3 , ξ4 , ξ5 , and ξ6 imply zero latent-root-greater-than-one rule routinely indicated
constraints on the variances for those factors and their covariances with from one sixth to one third as many factors as variables.
each other and with ξ1 and ξ2 . We could further constrain  by fixing the
covariance between ξ1 and ξ2 to zero, which would yield a model with Kaiser further argued that, when the latent root falls
two orthogonal factors. below 1.0, the internal consistency of the factor scores
304 • SECTION V/MODELS FOR LATENT VARIABLES

approaches zero.5 Finally, on a more practical level, This pattern of explicit endorsement by textbook authors
Kaiser argued that, based on his experience “of having and implicit endorsement by computer packages, con-
carried out more factor analytic calculations of the trasted with empirical findings that the procedure is
theoretical sort on electronic computers than anyone very likely to provide a grossly wrong answer, seems
walking the earth” (p. 141), the latent-root-greater- to guarantee that a large number of incorrect findings
will continue to be reported. (p. 439)
than-one rule “led to a number of factors correspond-
ing almost invariably . . . to the number of factors
which practicing psychologists were able to interpret” This pessimistic projection has been borne out.
(p. 145). Beginning 5 years after the publication of Zwick
The results of subsequent studies of the K-G rule and Velicer’s (1986) findings, Fabrigar et al. (1999)
were not so favorable. On theoretical grounds, the reviewed standard practice as evidenced in articles
rule is problematic because, although Guttman (1954) published in two major psychology journals. They
demonstrated its validity for determining the number found that, among those articles that specified the
of factors in a population matrix, its application is method by which they determined the number of fac-
virtually always to a matrix based on data from a tors, 28% use the K-G rule as the lone strategy, despite
sample. Because of errors of measurement that abound the fact that “we know of no study of this rule that
in such data, factors emerge that are not substantively shows it to work well” (p. 278). In short, application of
meaningful (Cattell, 1966). As such, it is possible the K-G rule is not a defensible strategy for determining
that, for a matrix estimated from sample data, a rela- the number of factors in applications of exploratory
tively large number of factors with latent roots greater factor analysis.
than one would be detected but that some portion of
these factors would not be substantively meaningful.
Indeed, simulation studies indicate that the K-G rule,
16.2.2. Scree Plot
when applied to data from a sample, virtually always
leads to overextraction (e.g., Browne, 1968; Lee & Another common approach to determining the
Comrey, 1979; Yoemans & Golder, 1982; Zwick & number of factors to retain in exploratory factor
Velicer, 1986). analysis is the scree test (Cattell, 1966).6 Like the K-G
Despite the now well-documented poor perfor- rule, the scree test involves evaluating the latent roots,
mance of the K-G rule in practice, it still is widely or eigenvalues, of the observed correlation matrix.
used. In large measure, this persistent adherence to Cattell (1966) described the goal of factor analysis
a faulty strategy seems to be attributable to sim- as detecting “non-trivial common variance” (p. 245).
plicity and availability. Indeed, as early as the mid- That is, although the fallible nature of observed data
1960s, Cattell (1966) noted that the K-G rule had will give rise to many trivial sources of common
become widely accepted “because of its ease rather variance, it is the goal of the factor analyst to distin-
than its rationale” (p. 261). In an influential review guish these “rubble factors” from those factors that are
of rules for determining the number of components prominent in the data and substantively meaningful.
to retain in principal components analysis, Zwick Cattell adopted the analogy of a rockslide for the pur-
and Velicer (1986) concluded that the K-G remains pose of distinguishing important and trivial common
popular because it continues to receive favorable cov- factors. He noted that, when eigenvalues are plotted
erage in general statistics textbooks and is invoked sequentially, the resulting pattern drops precipitously
automatically by most general-purpose statistical soft- before leveling off. Following the analogy, this rela-
ware packages. Reflecting on their finding that the tively level portion of the plot corresponds to the scree,
K-G rule often grossly overestimates the number “the straight line of rubble and boulders which forms at
of components to be retained, Zwick and Velicer the pitch of sliding stability at the foot of a mountain”
stated, (p. 249). A scree plot of hypothetical eigenvalues from
a factor analysis of 10 variables is shown in Figure 16.1.
5 Cattell (1966) took issue with Kaiser’s (1960) argument regarding the Cattell (1966) noted that, based on a number of
internal consistency of factor scores for latent roots less than 1. Specifi- studies in which the true number of factors was known,
cally, he argued that, whereas Kaiser’s point applied to all variables, one
“this scree invariably began at the kth latent root
typically is concerned only with those variables having salient loadings on
the factor. He also took issue with the implication by Kaiser that applied
researchers were interested in using factor analysis for the purpose of mea-
6 Fabrigar, Wegener, MacCallum, and Strahan (1999) found that the scree
suring concepts, arguing instead that the focus is more on the interpretation
of loadings for the purpose of defining theoretical concepts that are not test was used as the lone criterion for determining number of factors in
directly measured. 26% of the published articles included in their review.
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 305

Figure 16.1 Scree Plot From Hypothetical Factor Analysis of 10 Variables

3.5

2.5
Eigenvalue

2
elbow scree
1.5

0.5

−0.5
1 2 3 4 5 6 7 8 9 10
Factor Number

when k was the true number of factors” (p. 249). of accuracy can be obtained. Under these conditions,
As shown in Figure 16.1, the point at which the Zwick and Velicer (1986) found that the scree test
scree begins is referred to as the “elbow.” Follow- typically resulted in the retention of too many factors,
ing Cattell’s logic, the elbow falls at a point on the although the magnitude of overextraction was consid-
horizontal axis corresponding to the likely number erably less than for the K-G rule. Under conditions
of substantive factors (k = 4 in this example). of high factor saturation (i.e., salient loadings of .80),
Cattell confessed that “even a test as simple as this the scree test pointed to the correct number of factors
requires the acquisition of some art in administering about 70% of the time; however, accuracy dropped
it” (p. 256). It is this subjective quality of the scree to 40% under conditions of saturation more typical of
test that raises concerns about its usefulness. Inter- research in the social sciences. In short, the subjective
rater reliability for judgments of the number of factors nature of the scree test, coupled with its tendency to
to retain based on the scree test using data typical suggest too many factors in typical research condi-
of social science research is questionable. Following tions, argues persuasively against its use as the sole
training using instructions provided by Cattell and criterion for determining how many factors to extract
Vogelman (1977), Zwick and Velicer (1986) observed in applications of exploratory factor analysis.
inter-rater reliability estimates from .61 to 1.00 (see
also Crawford & Koopman, 1979) and correlations
between judgments by the trained raters and experts
16.2.3. Parallel Analysis
from .60 to .90. The mean correlation of .80 indicates
that, on average, well-trained raters often will reach a A more systematic evaluation of the eigenvalues
conclusion regarding how many factors to retain that of an observed correlation matrix is parallel analysis,
differs from the conclusion of experts. originally proposed by Horn (1965). Parallel analysis
Concerns stemming from the less-than-perfect relia- is based on differences between observed eigenvalues
bility of the scree test when used by individuals who are and expected eigenvalues from matrices of random
not expert factor analysts plague any evaluation of the data. The logic of parallel analysis is as follows: In
validity of the scree test. If trained raters’ judgments population data, the eigenvalues of a matrix of uncor-
are combined, yielding a judgment that is more reliable related variables would be equal to 1.0. In data from
than any given rater’s judgment, a “best-case” estimate a sample, a matrix with the same properties would, as
306 • SECTION V/MODELS FOR LATENT VARIABLES

a result of sampling error and bias due to estimation, scientists facile with SAS or SPSS and generally
produce some eigenvalues that exceed 1.0 and others familiar with the activity of simulating data.
that fall below 1.0. Indeed, if multiple samples were Early evaluations of parallel analysis revealed a
drawn from the same population, it would be possible slight tendency (about 5%) toward overextraction
to construct an empirical sampling distribution around under certain conditions when, as recommended by
the expected eigenvalues were there no common Horn (1965), the random-data eigenvalues against
factors in the population (Glorfeld, 1995). One could which the observed eigenvalues were compared were
then compare each observed eigenvalue to the distri- simple means of a set of random-data eigenvalues
bution of its corresponding eigenvalue from random at each serial position (Harshman & Reddon, 1983).
data to determine whether that eigenvalue differed sig- This bias vanishes when the criterion is the 95th per-
nificantly (i.e., exceeded the 95th percentile estimate) centile estimate of the random-data eigenvalues at
from the eigenvalue that would be expected were there each serial position, a logic based on the standard
no common variance to explain. The number of eigen- hypothesis-testing criterion (Glorfeld, 1995).7 Despite
values that significantly exceed the values expected the accuracy of parallel analysis for determining the
from random data is interpreted as the number of number of factors to extract under conditions typical of
factors or components to retain. social science research, its use remains relatively rare.
An aspect of parallel analysis that has received Fabrigar et al. (1999) found that, of the 129 articles
considerable attention is the method by which the that reported using factor analysis in two prominent
values and distributions of the eigenvalues from psychology journals published from 1991 through
random data are produced. One alternative is to gener- 1995, only 1 reported the use of parallel analysis to
ate multiple data sets of random-normal deviates that determine how many factors to extract.
comprise the same number of variables and assume
the same sample size as the observed data set. Using
this strategy, Humphreys and Montanelli (1975) found 16.2.4. Maximum Likelihood
parallel analysis to be accurate (and superior to max- Exploratory Factor Analysis
imum likelihood) across a range of analytic situations
typical of research in the social sciences. Easily There are a variety of procedures for fitting data
tailored computer programs that run under widely to a common factor model. These procedures, which
available statistical software (e.g., SAS and SPSS) produce estimates of the λs and δs in the measure-
are now available (e.g., O’Connor, 2000). These pro- ment equations, vary in the assumptions they make
grams extend the strategy used by Humphreys and regarding the observed data and the information they
Montanelli to allow for the generation of random devi- provide regarding the adequacy of a particular model
ates whose distribution corresponds to the distribution for explaining the associations among indicators.
of the observed variables (cf. Glorfeld, 1995). Although the maximum likelihood procedure requires
The allure of parallel analysis, coupled with applied a relatively strong set of assumptions regarding the
researchers’ general unfamiliarity with data simu- distribution of indicators and errors (Hu, Bentler, &
lation at the time of Humphreys and Montanelli’s Kano, 1992), it has the benefit of providing a test statis-
(1975) work, led to the development of more straight- tic for evaluating the tenability of particular models
forward methods of generating eigenvalues from given a set of data. Because a fundamental aspect of
random data. Most of this activity centered on the the plausibility of a model is the number of factors it
specification of regression equations for estimating specifies, the test statistics that can be generated when
eigenvalues of matrices with unities on the diago- maximum likelihood estimation is used provide an
nal (e.g., Allan & Hubbard, 1986; Lautenschlager, alternative means of determining the number of factors
Lance, & Flaherty, 1989; Montanelli, 1975; cf.
Lautenschlager, 1989). Although computer programs 7 Turner (1998) showed that, under certain conditions, use of the 95th
and tabled values for selected sample sizes and percentile as a criterion for the random-data eigenvalues could lead to
numbers of variables are available (e.g., Kaufman & underextraction. Specifically, when the observed data were generated by
Dunlap, 2000; Longman, Cota, Holden, & Fekken, a multilevel design or when all items are saturated by a single common
factor, eigenvalues after the first eigenvalue for the observed data will be
1989a, 1989b), and equations are available for matri- underestimated and likely fall below the 95th percentile estimate for the
ces with squared multiple correlations on the diagonal corresponding random-data eigenvalue. The circumstances that produce
(Montanelli & Humphreys, 1976), the regression this underextraction by parallel analysis are rare in practice and can be
overcome by building known features of the data structure into the parallel
approach is less precise than the simulation approach. analysis. At present, there are no computer programs available for this
Moreover, the latter is now quite feasible for social sophisticated, sequential application of parallel analysis.
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 307

that underlie the pattern of associations among a set of and continues by adding one factor at a time until
indicators. the obtained chi-square is nonsignificant. A common
Whereas principal factor procedures focus on problem with maximum likelihood estimation in
obtaining estimates that minimize residuals (or, alter- the exploratory factor analysis context are Heywood
natively, maximize variance accounted for), the max- cases—solutions in which the communality estimate
imum likelihood procedure focuses on obtaining the associated with one or more factors approaches or
set of estimates of the free parameters in the model exceeds 1.0, resulting in an associated uniqueness esti-
(principally the λs and δs) that has the highest mate that approaches zero or, counterintuitively, takes
probability of corresponding to the population values on a negative value. Heywood cases often result from
of the parameters as the size of the sample approaches overfitting (i.e., too many factors) but can result from
the size of the population (Gorsuch, 1974). That is, the underfitting as well.
goal of estimation is to maximize the likelihood of the Concern over Heywood cases, the need for sub-
parameters given the data. When an iterative search stantially greater computing power than required of
yields the set of parameter estimates that achieve this principal axis procedures, and the validity of the chi-
goal, the estimation is said to have converged. The square test under conditions typical of social science
question of whether this set of parameter estimates research argue against unqualified endorsement of
offers an account of the data that is no worse than the maximum likelihood exploratory factor analysis and
generally uninteresting model—which is, in effect, the the accompanying fit statistics as a routine strategy
observed correlation matrix itself—can be evaluated for determining the number of common factors (e.g.,
using a test statistic that is, in theory, distributed as a Jackson & Chan, 1980); however, this approach is the
chi-square. Because the goal is to obtain a set of para- only one that offers a focused statistical test of the
meter estimates in a specified model that fully accounts plausibility of a specific numbers of factors. Fortu-
for the observed data, the goal of hypothesis testing is nately, computer power is rarely an issue in the current
to fail to reject the null hypothesis of no difference era, and a variety of criteria for evaluating model
between the observed correlation matrix and the set of fit have been developed in the context of confirma-
correlations implied by the model. tory factor analysis that can be used for maximum
When maximum likelihood estimation is used in likelihood exploratory factor analysis as well (e.g.,
the context of exploratory factor analysis, the statis- Browne & Cudeck, 1993). These are described and
tical test is, in fact, a test of the adequacy of the illustrated later in the chapter. Also, increasing inter-
number of factors specified. There are two slightly est in confirmatory factor analysis, as well as the
different approaches to deriving the test statistic; both accompanying familiarity with parameter estimation
are products involving an adjusted sample size and the and evaluation, has resulted in social scientists who are
minimized value of the fitting function, computed as better equipped than ever to detect Heywood cases and
adjust model specifications to correct or avoid them.
FML = log∗ ()∗ + tr(S −1 ()) − log∗ S∗ − p,

where () is the implied covariance matrix of the

parameters, S is the observed covariance matrix, and 16.2.5. Unrestricted Factor Model
p is the number of indicators. The most widely used
Maximum likelihood is used to greater advantage
multiplier is N −1, where N is the sample size (Bollen,
as the typical estimation procedure in confirmatory
1989; Browne, 1982). An alternative involves a
factor analysis (Hoyle, 2000). The extension of maxi-
correction attributable to Bartlett (1937) and uses the
mum likelihood estimation from exploratory, or unre-
following as a multiplier:
stricted, factor analysis to confirmatory, or restricted,
(N − 1) − (2p + 4k + 5)/6, factor analysis can be attributed to Jöreskog (1969). As
typically applied, confirmatory factor models specify a
where p is the number of indicators, and k is particular number of factors and a pattern of loadings
the number of factors (Lawley & Maxwell, 1971). such that each indicator loads on one and only one
Although Bartlett corrections, as a class, are useful factor. This simple-structure specification is illustrated
in many contexts, the correction is rarely used in the in path diagram form in Figure 16.2.
factor analysis context and is not recommended here. As noted earlier, when omnibus fit indices indicate
In the typical application of maximum likelihood misspecification in a model such as the one shown in
factor analysis, a sequential set of analyses is run, Figure 16.2, it is not clear whether the source of mis-
which begins with the extraction of a single factor specification is the pattern of loadings or the number
308 • SECTION V/MODELS FOR LATENT VARIABLES

Figure 16.2 Simple Structure Specification Typical the highly parameterized model can be challenging;
of Applications of Confirmatory Factor however, we later illustrate a strategy that virtually
Analysis always results in a proper solution.
The unrestricted factor model is specified as follows:

1. For each of the k factors, one of the p indica-

tors is specified to load only on that factor; the
remaining loadings for these marker variables are
set to zero. The remaining p – k indicators are
Factor 1 Factor 2 left free to load on every factor.
2. The variances of the factors are fixed to unity, and
the covariances between factors are estimated
from the data.
l1 l2 l3 l4 l5 l6
Alternatively, the variances of the factors can be
estimated from the data and the metric of the fac-
Y1 Y2 Y3 Y4 Y5 Y6 tors established by fixing a loading on each of the
k factors to unity (Mulaik & Millsap, 2000). For
a correctly specified model, k 2 parameters are fixed
e1 e2 e3 e4 e5 e6 and degrees of freedom equal [p(p + 1)/2] − [(pk −
k 2 ) + k(k + 1)/2]. When specified as described,
the model will be identified and the solution unique
(Howe, 1955).
Successful estimation of the unrestricted factor
of factors. As such, the evaluation of model fit is model requires certain knowledge about the indica-
an evaluation of a diffuse hypothesis and, therefore, tors and their relation to the factors. Specifically, the
ambiguous in meaning (Rosnow & Rosenthal, 1988). marker variable for each factor should be the high-
This problem is exacerbated by the typical strategy est loading indicator on that factor, and the starting
of implementing a specification search while holding values for the free parameters, particularly the load-
the number of factors constant. Such a search would ings, should be reasonably close to the final estimates.
primarily be limited to cross-loadings and correlations This requirement of considerable a priori knowledge
between uniquenesses. A preferable strategy would be about the model has been a target of criticism (e.g.,
to disentangle the two major aspects of specification— Hayduk & Glaser, 2000) because the most straight-
the number of factors and the pattern of loadings on forward means of acquiring the necessary knowledge
those factors—and evaluate each in turn. A strategy for is to submit the data to an exploratory factor analysis
accomplishing this disentanglement is the unrestricted in which the number of factors is extracted that will
factor model (Jöreskog, 1977), which is equivalent to be specified in the unrestricted model. And given
the exploratory factor model estimated by maximum that a maximum likelihood exploratory factor analysis
likelihood, with the important exception that, once implicitly is specified exactly as described above, it
the number of factors has been determined in the un- would not seem necessary to estimate the model using
restricted factor model, one can readily move to a focus confirmatory factor analysis.
on the pattern of loadings on those factors. The benefit of estimating the model using confir-
The unrestricted factor model was described by matory factor analysis is apparent when the model
Jöreskog (1979) and has been incorporated by Mulaik is considered in the larger context of a framework
and Millsap (2000) into a comprehensive approach to for evaluating structural equation models. It is widely
evaluating the fit of structural equation models. Despite acknowledged that, within such models, a distinc-
the appeal of the model as a bridge between exploratory tion can (and perhaps should) be drawn between the
and confirmatory approaches to factor analysis, it is measurement model, which concerns the association
relatively unknown to researchers in the social sciences between indicators and latent variables, and the struc-
(for the three published applications of which we are tural model, which concerns the association among
aware, see Browne & Cudeck, 1993; Hox et al., 1999; latent variables (Anderson & Gerbing, 1988; Herting
Tepper & Hoyle, 1996). Although specification of the & Costner, 2000). The fit of the measurement model
model is unusual, it is not difficult. Estimation of sets an upper bound for the fit of the full model, as the
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 309

latter involves adding restrictions to the former (i.e., 12.2.6. Summary

they are nested models). As such, it is essential that the
We have described and offered commentary on
measurement portion of a structural equation model be
the performance of five strategies for addressing the
properly specified if the full model is to receive support
number-of-factors question in applications of factor
or, in the event of poor fit of the full model, the source
analysis. Although the Kaiser-Guttman rule and the
of misspecification correctly diagnosed.
scree plot are the most popular among researchers
Mulaik and Millsap (2000) advocate expanding
in the social sciences and are easily implemented
the two-step model testing sequence to four steps.
using standard statistical software, empirical evalua-
The second and third steps in their nested sequence
tions using variables for which the number of common
correspond to the standard steps just described, and
factors is known indicate that they rarely result in a
the fourth step involves moving from the fit of the
correct inference regarding how many factors to retain
full model to hypothesis tests about specific free
and interpret. Like the K-G rule and the scree plot,
parameters within the model. Their first step is the
parallel analysis focuses on the eigenvalues of the cor-
unrestricted model described here, and its inclusion
relation matrix, but it does so in a formal manner using
is based on the same logic that gave rise to the dis-
statistical criteria. Empirical evaluations of parallel
tinction between measurement and structural models.
analysis indicate excellent performance under condi-
Specifically, if, within the measurement model, the
tions typical of social science research, particularly
wrong number of factors is specified, then the model
when Horn’s (1965) original implementation of the
is sure not to fit when restrictions to the loadings are
strategy is adjusted by using the 95th rather than the
imposed, and an evaluation of the pattern of loadings
50th percentile random-data eigenvalues at each serial
is premature. As such, it is necessary to pin down the
position as criteria. Maximum likelihood exploratory
correct number of factors before moving to a full-
factor analysis and the unrestricted factor model are
blown evaluation of the measurement model.8
equivalent strategies that provide a statistical test of
For our purposes, the unrestricted model need not
whether a specific number of factors are sufficient
be viewed as part of Mulaik and Millsap’s (2000)
given the observed data. The unrestricted factor model
four-step nested sequence because we are interested
is estimated within the confirmatory factor analysis
in the measurement model as an end in itself. So
context and has the benefit of allowing restrictions to
we are, in effect, arguing for a two-step approach
the pattern of loadings once the number of factors has
to fitting common factor models within confirmatory
been established.
factor analysis when there is not an unequivocal basis
In the remainder of the chapter, we illustrate paral-
for specifying a particular number of factors and pat-
lel analysis, maximum likelihood exploratory factor
tern of loadings. The first step involves evaluating
analysis, and the unrestricted factor model using
the fit of a series of unrestricted models that specify
responses to items on a self-report measure designed
plausible numbers of factors. In this regard, the strat-
to be multidimensional. These data are particularly
egy does not differ from the standard implementation
appealing for this purpose because, although the mea-
of maximum likelihood exploratory factor analysis.
sure was written to reflect three dimensions, there is
The second step involves imposing restrictions on the
ample evidence to suggest that it reflects four or five
loadings using either a theoretical or empirical ratio-
dimensions.
nale. The fit of a given model at the first step establishes
a ceiling for the fit of restricted models and, therefore,
should be near perfect. Models at the second step are
nested in their unrestricted counterpart and can be eval-
16.3. Example: Dimensionality
uated using both chi-square differences and absolute
fit indices, such as the comparative fit index (Bentler, of Self-Consciousness
1990a) or root mean square error of approximation
(Steiger, 1990). The Self-Consciousness Scale (Fenigstein, Scheier, &
Buss, 1975) is a widely used self-report measure of
the tendency to direct attention toward the self. The
8 Although the unrestricted factor model is an appropriate test of the 23-item measure comprises three subscales that reflect
number of factors for the overwhelming majority of applications in the different manifestations of self-attention. The private
social sciences, there clearly are factor models for which it is not appro- self-consciousness items tap the tendency to focus
priate (Bollen, 2000; Hayduk & Glaser, 2000). Such examples include
simplex models, models with correlated errors, and models in which on internal thoughts and feelings. The public self-
subfactors are expected. consciousness items capture the tendency to focus on
310 • SECTION V/MODELS FOR LATENT VARIABLES

oneself as a social object—that is, to see oneself from As noted in the previous section, when evaluated
the imagined perspective of others. The social anxiety in the context of a full structural equation model, a
subscale measures the tendency to experience anxiety measurement model must fit exceptionally well
in the presence of others as a result of heightened public because restrictions placed on the model to evaluate
self-consciousness. directional associations between factors will certainly
The numerous factor analyses of responses to these lead to a decrement in fit. In other words, the fit of
items have produced conflicting results regarding the the measurement model sets the ceiling for fit of the
correspondence of the structure evident in responses full model of which it is part. Moreover, exceptional
with the hypothesized tripartite structure. Fenigstein fit of a measurement model is predicated on speci-
et al. (1975), as part of their original presentation of the fication of the correct number of factors. Hence, if
measure, interpreted the pattern of loadings on three the Self-Consciousness Scale is to ever be included
orthogonally rotated principal components. Scheier in a structural equation model with latent variables,
and Carver (1985) replicated the pattern of load- it is essential that the correct number of factors and
ings using principal factors extraction followed by an the correct pattern of loadings on those factors be
orthogonal rotation. Burnkrant and Page (1984) used established.
confirmatory factor analysis to evaluate the dimension-
ality of each subscale in isolation of the others before
fitting a model to the entire set of items. They obtained
16.3.1. Parallel Analysis
good support for unidimensional models of public
self-consciousness and social anxiety but clear evi- As detailed earlier, parallel analysis involves com-
dence that the private self-consciousness items reflect paring eigenvalues from a factor analysis of a set of
two factors. They concluded that four, not three, observed data with eigenvalues from a factor analysis
factors underlie responses to the Self-Consciousness of sets of random data comprising the same number
Scale. A drawback to their analysis and conclusions of variables and observations as the observed data set.
is that they advocated and fit models that excluded Only factors whose eigenvalue exceeds, at some pre-
5 of the 23 items; their recommendation that the determined probability, the corresponding random-
five items be eliminated from the scale has not been data eigenvalue are retained for interpretation.
accepted by researchers who use the measure. Mittal Although relatively straightforward regression-based
and Balasubramanian (1987) used manual iteration of procedures for estimating random-data eigenvalues
communalities from maximum likelihood estimation have been developed, these are not precise for most
to evaluate the dimensionality of the three originally applications. Moreover, the more flexible and pre-
prescribed subscales. They replicated the finding that cise simulation approach to generating random-data
the private self-consciousness items break into two eigenvalues is not difficult to implement on contempo-
factors and found that the public self-consciousness rary desktop computers using programs that run under
items break into two factors as well. A unidimensional widely accessible statistical software.
model of the social anxiety items was tenable only after For the current analysis, we used O’Connor’s (2000)
dropping two items. SAS program for simulating data sets using the raw
A surprising feature of these analyses, as well observed data as input.9 We generated 500 random
as other factor analyses, of responses to the Self- permutations of the raw data, an approach that pre-
Consciousness Scale (e.g., Britt, 1992; Piliavin & serves the distributional properties of the original data
Charng, 1988) is that none of them employed any in the random data sets. We used as a criterion the
of the strategies for determining the number of fac- 95th percentile estimate of the random-data eigen-
tors reviewed in this chapter (including the widely value for each factor. In other words, we retained all
used K-G rule and scree plot). Each began with the factors whose eigenvalue exceeded the corresponding
original three-factor structure as the assumed model random-data eigenvalue to a degree unlikely to occur
and searched for ways to adjust that model to better by chance.
account for observed data. None of the analyses that The two sets of eigenvalues are overlaid in the scree
used maximum likelihood estimation obtained values plot shown in Figure 16.3. As indicated in the figure,
of fit statistics that would support incorporating their the two lines intersect between the seventh and eighth
measurement model into a model with structural paths.
In each case, values of chi-square were very large rela- 9 The program we used, as well as related programs that run under
tive to degrees of freedom, and in no case did the value SAS, SPSS, or MATLAB, are available for download from the Web
of the standardized index used to evaluate fit reach the at [Link] The raw observed
typical minimum criterion of .90. data can be obtained from Rick Hoyle (rhoyle@[Link]).
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 311

Figure 16.3 Plot of Eigenvalues in Serial Position for Observed Data (Solid Line) and 95th Percentile Eigenvalues
From Distribution of 500 Random Permutations of the Raw Data (Broken Line)

4.5

3.5

2.5
Eigenvalue

1.5
intersection of
scree plots
1

0.5

−0.5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Factor Number

eigenvalues, indicating that, beyond seven factors, the particular number of factors can be justified statisti-
eigenvalues of the observed correlation matrix are not cally. Statistical justification comes in two forms. The
significantly greater than the values that would be traditional approach to hypothesis testing in the max-
expected were there no common factors at all. Hence, imum likelihood context is a test statistic that, when
from the results of parallel analysis, we conclude that certain assumptions are met, is distributed as a chi-
the correct number of factors is seven. square. If this test is used to justify the decision to retain
a specific number of factors, the criterion is a p-value
greater than .05, signifying a failure to reject the null
16.3.2. Maximum Likelihood Strategies hypothesis that the covariance matrix implied by the
model is equivalent to the observed covariance matrix.
As we have established, maximum likelihood An alternative approach is to consult one or more of
exploratory factor analysis and the unrestricted factor a growing number of alternative indexes of fit. We
model are one and the same. As such, we present the advocate Bentler’s (1990a) comparative fit index (CFI)
statistical results that would be generated by either and Steiger’s (1990) root mean square error of approx-
strategy, followed by additional analyses involving the imation (RMSEA).10 CFI indexes the proportionate
pattern of loadings using the unrestricted factor model improvement in fit of a specified model over a model
as a starting point.
Whether one uses exploratory factor analysis or
10 These fit indices are provided by all major software programs for estimat-
formally specifies the unrestricted model in a confir-
ing structural equation models (e.g., EQS, LISREL, AMOS). If the models
matory factor analysis, a separate analysis must be are estimated using maximum likelihood exploratory factor analysis, the
run for each number of factors to be considered. As fit indices we reported, as well as several others, can be obtained using
parsimony is desirable in factor models, it is typ- a SAS macro written by Steven Gregorich. The macro, which requires
as input the number of variables, degrees of freedom, and chi-square
ical to begin by estimating a model with a single for each model of interest, is available for download from the Web at
factor and, if necessary, continue sequentially until a [Link] [Link].
312 • SECTION V/MODELS FOR LATENT VARIABLES

Table 16.1 Fit Statistics for Models Positing Zero to Eight Factors Underlying Responses to the Self-Consciousness
Scale
k df FML χ2 p CFI RMSEA RMSEA.05 RMSEA.95

0 253 6.868 2238.85 .00001 .000 .155 .150 .161

1 230 4.041 1317.24 .00001 .453 .120 .114 .127
2 208 2.595 845.91 .00001 .679 .097 .090 .104
3 187 1.392 453.78 .00001 .866 .066 .058 .074
4 167 1.038 338.41 .00001 .914 .056 .047 .065
5 148 0.807 263.07 .00001 .942 .049 .039 .025
6 130 0.657 211.54 .00001 .959 .044 .033 .054
7 113 0.508 165.68 .00092 .973 .038 .025 .050
8 97 0.365 119.10 .06341 .989 .026 .000 .041

NOTE: N = 327. k = number of factors; FML = maximum likelihood fitting function; CFI = comparative fit index; RMSEA = root mean square error
of approximation (with 90% confidence limits). Consistent with common use in confirmatory factor analysis, chi-square values do not reflect Barlett’s
correction. Italicized values indicate statistical support for the model they accompany.

that specifies no commonality among the indicators— values in the table, the results point to seven, perhaps
the null, or independence, model. Following Mulaik eight, factors. Although CFI exceeds .95 for the six-
and Millsap’s (2000) recommendation, a value of .95 factor solution, neither the chi-square test nor RMSEA
or greater would provide justification for a particular support it. The RMSEA falls at the criterion, and CFI
measurement model. RMSEA indexes the discrep- well exceeds the criterion for the seven-factor solution;
ancy between the observed covariance matrix and the however, the chi-square remains highly significant. A
covariance matrix implied by the model per degree of model with eight factors yields statistical support on
freedom. A value of zero indicates no discrepancy and, all criteria.
therefore, a perfect fit of the model to the data. It is now The parallel analysis and two widely used fit indices
commonplace to put a 90% confidence interval around support the interpretation of seven factors. The tradi-
the point estimate of RMSEA. Although .08 typically tional chi-square test suggests the need for an addi-
is acceptable as the maximum value of the upper limit, tional factor. The chi-square test requires stringent,
the goal of a superior fit of the unrestricted factor model perhaps unrealistic, assumptions about the data and
suggests that .05 is a more appropriate maximum for the model, and it is a somewhat unrealistic test, for
the upper limit of the confidence interval (Browne & it is a test of whether the model holds exactly in the
Cudeck, 1993). population (Browne, 1984). Nonetheless, we exam-
For the confirmatory factor analyses, models were ined parameter estimates for the eight-factor solution
specified by using output from an exploratory factor rather than dismiss the chi-square test out of hand.
analysis to determine the marker variable (i.e., highest Upon initial estimation, both the seven- and eight-
loading indicator) for each factor. As noted earlier, for factor solutions produced Heywood cases—apparent
these variables, only the loading on the designated negative uniquenesses for Items 8 and 14. When the
factor was estimated; the remaining loadings on the values for the suspect uniquenesses were permitted to
factor were fixed at zero. All other loadings were free dip below zero during iteration, both models yielded
to be estimated. In addition, the variances of the fac- proper solutions. The final estimate for the Item 8
tors were fixed at unity, and the covariances between uniqueness in both solutions was negative but non-
factors were free to be estimated. Loadings and inter- significant (p > .60). The final estimate in both
factor correlations from exploratory factor analyses solutions for the Item 14 uniqueness was greater than,
were used as starting values. but not significantly different from, zero (p > .50).
Results from maximum likelihood estimation of a Thus, we were able to obtain proper solutions for
series of unrestricted models of the Self-Consciousness both the seven- and eight-factor models by allowing
Scale are summarized in Table 16.1. The first model, estimates of uniqueness to dip below zero during the
for which k = 0, serves as the comparison for com- iterative estimation process (Chen, Bollen, Paxton,
putation of CFI. It also can be viewed as a test for Curran, & Kirby, 2001).
commonality among the indicators, and the highly Before attempting to interpret the solutions, we used
undesirable values of the various indices of fit clearly the multivariate Wald test to identify loadings and
indicate that at least one common factor underlies the inter-factor correlations that could be constrained to
covariance matrix. As indicated by the highlighted zero without significant loss in fit relative to the gain
 Chapter 16/Determining the Number of Factors in Exploratory and Confirmatory Factor Analysis • 313

in degrees of freedom. For the seven-factor model, 16.4. Summary and Conclusions
8 of 21 inter-factor covariances were nonsignificant
and, therefore, fixed at zero. Sixty-two loadings were We described and illustrated three formal approaches
nonsignificant and constrained to zero, and one loading to determining the number of factors that underlie
that had been fixed in the original specification was a set of variables. Parallel analysis focuses on the
freed. This resulted in a net gain of 69 degrees of free- eigenvalues of the correlation matrix, a focus familiar
dom moving from the unrestricted model to a restricted to researchers accustomed to invoking the Kaiser-
model. The fit of this model exceeded our criteria for Guttman rule or using the scree test. Parallel analysis
CFI and RMSEA, but the chi-square was significant: requires additional effort because the researcher must
χ 2 (182, N = 327) = 235.13, p = .004, CFI = .973, generate a corresponding set of random-data eigen-
RMSEA = .030(.017, .040). Importantly, the many values; however, readily available computer programs
zero constraints placed on parameters that had been render this activity rather straightforward. More impor-
free in the unrestricted model did not result in a decline tant, unlike the K-G rule and the scree test, for which
in fit, χ 2 (69, N = 327) = 69.45, p = .46. there is scant empirical support, parallel analysis is
Moving to the parameter estimates, the solution virtually always accurate under conditions typical of
indicated considerable factorial complexity in the item social science research.
set. Of the 23 items, only 6 loaded on a single factor. Maximum likelihood exploratory factor analysis and
Most items loaded significantly on two or three factors, the unrestricted factor model, as specified in confir-
although it is important to note that loadings as low as matory factor analysis, represent two implementations
.15 were statistically significant. If standard saliency of the same statistical model. In each case, a formal
criteria are used (e.g., .30 or .40), factorial complexity statistical test can be undertaken of the adequacy of
diminishes, although the pattern still does not manifest particular numbers of factors to account for the asso-
simple structure. Consistent with documented attempts ciations in an observed correlation matrix. The default
at factoring the measure, the private and public self- test in both models is a chi-square test; however, our
consciousness item sets each form two factors. The recommendation is that researchers eschew this un-
social anxiety items form a relatively coherent factor, realistically stringent hypothesis test and, instead, take
although a subset of those items coalesces with a advantage of recently developed fit indexes such as
subset of the public self-consciousness factor to the CFI and RMSEA. Because factor models estimated
form a separate factor. Finally, Items 3 and 9, which using confirmatory factor analysis often are incor-
typically fail to load in analyses that extract three or porated into structural models including directional
four factors, are the strongest indicators of a seventh associations among factors, we argue that such models,
factor. particularly at the stage when the number-of-factors
Our suspicion that the eight-factor solution would question is being considered, be evaluated against fit
constitute an overextraction was supported when we criteria that are more stringent than is typical of tests
followed the same strategy as for the seven-factor solu- of structural models (e.g., CFI > .95; upper limit of
tion in moving from the unrestricted to a restricted RMSEA confidence interval < .05).
model. One factor (the fifth factor extracted in the max- A by-product of our analysis is the illustration, in
imum likelihood exploratory factor analysis) was rep- extreme form, that confirmatory factor models need not
resented by a single indicator; therefore, the restricted be specified as simple structure models. Indeed, simple
eight-factor model was underidentified and could not structure specification, such as the model illustrated
be estimated. This result underscores our reservations in Figure 16.2, is unlikely to hold for items typical
about using the chi-square test in either exploratory of measures in the social sciences. For this reason, it
or confirmatory factor analysis for determining the seems unreasonable for researchers to rigidly adhere
number of factors to interpret. Unlike indices such to this standard specification, leaving only covariances
as CFI and RMSEA, the chi-square test, even when among uniqueness terms open to specification search-
assumptions regarding the data and model ensure that ing in misspecified models. And, as we have asserted,
the statistic is in fact distributed as a chi-square, is the consideration of cross-loadings (or any pattern of
a test of exact fit. This unrealistic hypothesis test, loadings) is reasonable only after the correct number
if taken seriously, is very likely to lead to overex- of factors has been determined.
traction, as illustrated by our eight-factor unrestricted Factor analysis is a vital statistical tool for
model, the only model that was supported by the social scientists. When implemented and interpreted
chi-square test. correctly, factor analysis provides a means of
314 • SECTION V/MODELS FOR LATENT VARIABLES

operationally defining variables that cannot be Burnkrant, R. E., & Page, T. J., Jr. (1984). A modification of
measured directly. At the core of factor analysis is the the Fenigstein, Scheier, and Buss Self-Consciousness Scales.
Journal of Personality Assessment, 48, 629–637.
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Cattell, R. B. (1966). The scree test for the number of factors.
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