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The cornlnunalities hj represent the fraction of the total variance' 'accounted for of variabie j. Ry calculating the communalities we can keep track of how much of-the original variance that was contained in variable j is still being accounted for by the 'numbcr of factors we have retained. As a consequence, when p = m2hj2 = 1, always. so long as the data was standardized first. The communalities are calculated in thc following fashion:
One can readlthink of this as: summing the squares of -the factor loadings horizontally across the factor loadings matrix.
Question Following the general methodology used by econometricians as explained in the session for week 1 (eight steps), explain how you would proceed to determine if a good com
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