1
Please use the ‘Santa Fe’ file to develop an index for the risk seeking of customers.
First, write down in a Word document your own list of indicator variables from the questionnaire that might be correlated with the latent variable “Risk-Seeking”. Then follow the procedure as discussed (reverse score variables if necessary, standardize them, and sum them up). Call the resulting variable “IndexRisk”, and send me a Word document that includes the list of indicator variables, plus the the mean, standard deviation, skewness and kurtosis of the latent variable “Indexrisk”, plus a chart of the distribution of “Indexrisk”.
2.

Please use the ‘Santa Fe’ file and sum up the variables V14/15/18 from the Santa Fe Database as a principal component “PrincComp”. Send me a Word document that includes the mean, standard deviation, skewness and kurtosis of the latent variable “PrincComp”, plus a chart of the distribution of “PrincComp”. Also note some thoughts on the following question: What could the latent variable be about that is summarized by it?

3.

Please use the ‘Santa Fe’ file and sum up the variables V2/5/6
1.    A) as an Index
2.    B) as a Principal Component
3.    C) as a Factor Score.

Send me a Word document that includes the mean, standard deviation, skewness and kurtosis of all three scores of the latent variable. Offer some answers to the following questions: How strongly are the three scores of the latent variable correlated? What might the latent variable stand for? Which of the three approaches A,B,C seems to be the most reasonable one, in your opinion?