Using Multiple Regression to Determine the Number of Factors to Retain in Factor Analysis

Abstract

A simple, analytical approach using multiple regression analysis is presented as a way to determine the number of factors to retain in a factor analysis. Two regression lines are found from the points in a scree plot and the number of retained factors is chosen at a point that maximally separates the two regression lines. Applications of the technique to data from the literature suggest that the results agree closely with solutions based on the somewhat subjective visual scree test and may be better than those from the analytical CNG method.