Dealing with Multicollinearity in Factor Analysis: The Problem, Detections, and Solutions

Multicollinearity in factor analysis has negative effects, including unreliable factor structure, inconsistent loadings, inflated standard errors, reduced discriminant validity, and difficulties in interpreting factors. It also leads to reduced stability, hindered factor replication, misinterpretation of factor importance, increased parameter estimation instability, reduced power to detect the true factor structure, compromised model fit indices, and biased factor loadings. Multicollinearity introduces uncertainty, complexity, and limited generalizability, hampering factor analysis. To address multicollinearity, researchers can examine the correlation matrix to identify variables with high correlation…