2/10/2021 Overview of Multivariate Analysis | What is Multivariate Analysis and Model Building Process?

Overview of Multivariate
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Analysis | What
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is
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Multivariate Analysis and Model Building
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By Great Learning Team - Jul 29, 2020 

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1. Introduction to Multivariate Analysis

2. History
3. An Overview
4. Advantages and Disadvantages
5. Classi cation Chart of Multivariate Techniques
6. Multivariate Analysis of Variance and Covariance
7. The Objective of multivariate analysis
8. Model Building Process
9. Model Assumptions
10. Summary

Contributed by: Harsha Nimkar

LinkedIn Pro le: https://www.linkedin.com/in/harsha-nimkar-8b117882/

Introduction
Multivariate means involving multiple dependent variables resulting in one outcome. This
explains that the majority of the problems in the real world are Multivariate. For example,
we cannot predict the weather of any year based on the season. There are multiple
factors like pollution, humidity, precipitation, etc. Here, we will introduce you to
multivariate analysis, its history, and its application in different elds.  

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The History of Multivariate analysis

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In 1928, Wishart presented his paper. The Precise distribution of the sample covariance
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matrix of the multivariate normal population, which is the initiation of MVA.
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In the 1930s, R.A. Fischer, Hotelling, S.N. Roy, and B.L. Xu et al. made a lot of fundamental
theoretical work on multivariate analysis. At that time, it was widely used in the elds of
psychology, education, and biology. 

In the middle of the 1950s, with the appearance and expansion of computers, multivariate
analysis began to play a big role in geological, meteorological. Medical and social and
science. From then on, new theories and new methods were proposed and tested
constantly by practice and at the same time, more application elds were exploited. With
the aids of modern computers, we can apply the methodology of multivariate analysis to
do rather complex statistical analyses. 

Multivariate analysis: An overview

Suppose a project has been assigned to you to predict the sales of the company. You
cannot simply say that ‘X’ is the factor which will affect the sales.

We know that there are multiple aspects or variables which will impact sales. To analyze
the variables that will impact sales majorly, can only be found with multivariate analysis.
And in most cases, it will not be just one variable. 

Like we know, sales will depend on the category of product, production capacity,
geographical location, marketing effort, presence of the brand in the market, competitor
analysis, cost of the product, and multiple other variables. Sales is just one example; this
study can be implemented in any section of most of the elds. 

Multivariate analysis is used widely in many industries, like healthcare. In the recent event
of COVID-19, a team of data scientists predicted that Delhi would have more than 5lakh
COVID-19 patients by the end of July 2020. This analysis was based on multiple variables

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like government decision, public behavior, population, occupation, public transport,

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healthcare services, and overall immunity of theBUSINESS ANALYTICS
community.    CLOUD COMPUTING 

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As per the Data Analysis study by Murtaza Haider of Ryerson university on the coast of
the apartment and what leads to an increase in cost orMORE
decrease in cost, is also based on 

multivariate analysis. As per that study, one of the major factors was transport
infrastructure. People were thinking of buying a home at a location which provides better
transport, and as per the analyzing team, this is one of the least thought of variables at the
start of the study. But with analysis, this came in few nal variables impacting outcome.

Multivariate analysis is part of Exploratory data analysis. Based on MVA, we can visualize
the deeper insight of multiple variables.

There are more than 20 different methods to perform multivariate analysis and which
method is best depends on the type of data and the problem you are trying to solve. 

Multivariate analysis (MVA) is a Statistical procedure for analysis of data involving more
than one type of measurement or observation. It may also mean solving problems where
more than one dependent variable is analyzed simultaneously with other variables.

Advantages and Disadvantages of Multivariate Analysis

Advantages

The main advantage of multivariate analysis is that since it considers more than one
factor of independent variables that in uence the variability of dependent variables,
the conclusion drawn is more accurate.
The conclusions are more realistic and nearer to the real-life situation.

Disadvantages

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The main disadvantage of MVA includes that it requires rather complex computations
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 conclusion.
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Many observations for a large number of variables need to be collected and tabulated;
it is a rather
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Classi cation Chart of Multivariate Techniques
Selection of the appropriate multivariate technique depends upon-

a) Are the variables divided into independent and dependent classi cation? 

b) If Yes, how many variables are treated as dependents in a single analysis? 

c) How are the variables, both dependent and independent measured?

Multivariate analysis technique can be classi ed into two broad categories viz., This
classi cation depends upon the question: are the involved variables dependent on each
other or not? 

If the answer is yes: We have Dependence methods.

If the answer is no: We have Interdependence methods. 

Dependence technique:  Dependence Techniques are types of multivariate analysis

techniques that are used when one or more of the variables can be identi ed as
dependent variables and the remaining variables can be identi ed as independent.

Also Read: What is Big Data Analytics?

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Multiple Regression
Multiple Regression Analysis– Multiple regression is an extension of simple linear
regression. It is used when we want to predict the value of a variable based on the value of
two or more other variables. The variable we want to predict is called the dependent
variable (or sometimes, the outcome, target, or criterion variable). Multiple regression
uses multiple “x” variables for each independent variable: (x1)1, (x2)1, (x3)1, Y1)

Also Read: Linear Regression in Machine Learning

Conjoint analysis  
‘Conjoint analysis‘ is a survey-based statistical technique used in market research that
helps determine how people value different attributes (feature, function, bene ts) that
make up an individual product or service. The objective of conjoint analysis is to
determine the choices or decisions of the end-user, which drives the
policy/product/service. Today it is used in many elds including marketing, product
management, operations research, etc.

It is used frequently in testing consumer response to new products, in acceptance of

advertisements and in-service design. Conjoint analysis techniques may also be referred
to as multi-attribute compositional modeling, discrete choice modeling, or stated
preference research, and is part of a broader set of trade-off analysis tools used for
systematic analysis of decisions. 

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There are multiple conjoint techniques, few of them are CBC (Choice-based conjoint) or
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ACBC (Adaptive CBC).

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Multiple Discriminant Analysis

The objective of discriminant analysis is to determine group membership of samples from
a group of predictors by nding linear combinations of the variables which maximize the
differences between the variables being studied, to establish a model to sort objects into
their appropriate populations with minimal error. 

Discriminant analysis derives an equation as a linear combination of the independent

variables that will discriminate best between the groups in the dependent variable. This
linear combination is known as the discriminant function. The weights assigned to each
independent variable are corrected for the interrelationships among all the variables. The
weights are referred to as discriminant coef cients.

The discriminant equation: 

F = β0 + β1X1 + β2X2 + … + βpXp + ε 

where, F is a latent variable formed by the linear combination of the dependent variable,
X1, X2,… XP is the p independent variable, ε is the error term and β0, β1, β2,…, βp is the
discriminant coef cients.

A linear probability model

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A linear probability model (LPM) is a regression model where the outcome variable is
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binary, and one or more explanatory variables are used to predict the outcome.
Explanatory variables can themselves be binary or be continuous. If the classi cation
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involves a binary dependent variable and the independent variables include non-metric
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ones, it is better to apply linear probability models. MORE 

Binary outcomes are everywhere: whether a person died or not, broke a hip, has
hypertension or diabetes, etc.

We typically want to understand what the probability of the binary outcome is given
explanatory variables.

We could actually use our linear model to do so, it’s very simple to understand why. If Y is
an indicator or dummy variable, then E[Y |X] is the proportion of 1s given X, which we
interpret as a probability of Y given X.

We can then interpret the parameters as the change in the probability of Y when X
changes by one unit or for a small change in X For example, if we model  , we could
interpret β1 as the change in the probability of death for an additional year of age

Multivariate Analysis of Variance and Covariance

Multivariate analysis of variance (MANOVA) is an extension of a common analysis of
variance (ANOVA). In ANOVA, differences among various group means on a single-
response variable are studied. In MANOVA, the number of response variables is increased
to two or more. The hypothesis concerns a comparison of vectors of group means.  A
MANOVA has one or more factors (each with two or more levels) and two or more
dependent variables. The calculations are extensions of the general linear model
approach used for ANOVA.

Canonical Correlation Analysis

Canonical correlation analysis is the study of the linear relations between two sets of
variables. It is the multivariate extension of correlation analysis.

CCA is used for two typical purposes :-

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Data Reduction
Data Interpretation
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You could compute

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in the second set (q), however interpretation is dif cult when pq is large. 
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Canonical Correlation Analysis allows us to summarize the relationships into a lesser

number of statistics while preserving the main facets of the relationships. In a way, the
motivation for canonical correlation is very similar to principal component analysis.

Structural Equation Modelling

Structural equation modeling is a multivariate statistical analysis technique that is used to
analyze structural relationships. It is an extremely broad and exible framework for data
analysis, perhaps better thought of as a family of related methods rather than as a single
technique. 

SEM in a single analysis can assess the assumed causation among a set of dependent and
independent constructs i.e. validation of the structural model and the loadings of
observed items (measurements) on their expected latent variables (constructs) i.e.
validation of the measurement model. The combined analysis of the measurement and the
structural model enables the measurement errors of the observed variables to be
analyzed as an integral part of the model, and factor analysis combined in one operation
with the hypotheses testing.

Interdependence Technique
Interdependence techniques are a type of relationship that variables cannot be classi ed
as either dependent or independent. 

It aims to unravel relationships between variables and/or subjects without explicitly

assuming speci c distributions for the variables. The idea is to describe the patterns in the
data without making (very) strong assumptions about the variables. 

Factor Analysis 

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Factor analysis is a way to condense the data in many variables into just a few variables.
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For this reason, it is also sometimes called “dimension reduction”. It makes the grouping of
variables with high correlation. Factor analysis includes techniques such as principal
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component analysis and common factor analysis.
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This type of technique is used as a pre-processing step to transform the data before using
other models. When the data has too many variables, the performance of multivariate
techniques is not at the optimum level, as patterns are more dif cult to nd. By using
factor analysis, the patterns become less diluted and easier to analyze.

Cluster analysis
Cluster analysis is a class of techniques that are used to classify objects or cases into
relative groups called clusters. In cluster analysis, there is no prior information about the
group or cluster membership for any of the objects.

While doing cluster analysis, we rst partition the set of data into groups based on data
similarity and then assign the labels to the groups.
The main advantage of clustering over classi cation is that it is adaptable to changes
and helps single out useful features that distinguish different groups.

Cluster Analysis used in outlier detection applications such as detection of credit card
fraud. As a data mining function, cluster analysis serves as a tool to gain insight into the
distribution of data to observe the characteristics of each cluster.

Multidimensional Scaling
Multidimensional scaling (MDS) is a technique that creates a map displaying the relative
positions of several objects, given only a table of the distances between them. The map
may consist of one, two, three, or even more dimensions. The program calculates either
the metric or the non-metric solution. The table of distances is known as the proximity
matrix. It arises either directly from experiments or indirectly as a correlation matrix. 

Correspondence analysis 
Correspondence analysis is a method for visualizing the rows and columns of a table of
non-negative data as points in a map, with a speci c spatial interpretation. Data are
usually counted in a cross-tabulation, although the method has been extended to many
other types of data using appropriate data transformations. For cross-tabulations, the
method can be considered to explain the association between the rows and columns of
the table as measured by the Pearson chi-square statistic. The method has several
similarities to principal component analysis, in that it situates the rows or the columns in a

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high-dimensional space and then nds a best- tting subspace, usually a plane, in which to
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approximate the points. 

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A correspondence table is any rectangular two-way array of non-negative quantities that
indicates the strength of association between the rowMORE
entryand the column entry of the 
table. The most common example of a correspondence table is a contingency table, in
which row and column entries refer to the categories of two categorical variables, and the
quantities in the cells of the table are frequencies.

The Objective of multivariate analysis

(1) Data reduction or structural simpli cation: This helps data to get simpli ed as possible
without sacri cing valuable information. This will make interpretation easier.

(2) Sorting and grouping: When we have multiple variables, Groups of “similar” objects or
variables are created, based upon measured characteristics. 

(3) Investigation of dependence among variables: The nature of the relationships among
variables is of interest. Are all the variables mutually independent or are one or more
variables dependent on the others? 

(4) Prediction Relationships between variables: must be determined for the purpose of
predicting the values of one or more variables based on observations on the other
variables.

(5) Hypothesis construction and testing. Speci c statistical hypotheses, formulated in

terms of the parameters of multivariate populations, are tested. This may be done to
validate assumptions or to reinforce prior convictions.

Also Read: Introduction to Sampling Techniques

Model Building Process

Model Building–choosing predictors–is one of those skills in statistics that is dif cult to
tell. It is hard to lay out the steps, because at each step, you must evaluate the situation
and make decisions on the next step. But here are some of the steps to keep in mind.

The primary part (stages one to stages three) deals with the analysis objectives, analysis
style concerns, and testing for assumptions. The second half deals with the problems
referring to model estimation, interpretation and model validation. Below is the general
ow chart to building an appropriate model by using any application of the variable
techniques-

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Model Assumptions
Prediction of relations between variables is not an easy task. Each model has its
assumptions. The most important assumptions underlying multivariate analysis are
normality, homoscedasticity, linearity, and the absence of correlated errors. If the dataset
does not follow the assumptions, the researcher needs to do some preprocessing. Missing
this step can cause incorrect models that produce false and unreliable results.

Multivariate Statistics Summary

The key to multivariate statistics is understanding conceptually the relationship among
techniques with regards to: 

The kinds of problems each technique is suited for.

The objective(s) of each technique.
The data structure required for each technique,
Sampling considerations for each technique.
Underlying mathematical model, or lack thereof, of each technique.
Potential for complementary use of techniques

Finally, I would like to conclude that each technique also has certain strengths and
weaknesses that should be clearly understood by the analyst before attempting to
interpret the results of the technique. Current statistical packages (SAS, SPSS, S-Plus, and
others) make it increasingly easy to run a procedure, but the results can be disastrously
misinterpreted without adequate care.

One of the best quotes by Albert Einstein which explains the need for Multivariate
analysis is, “If you can’t explain it simply, you don’t understand it well enough.” 

I tried to provide every aspect of Multivariate analysis. In short, Multivariate data analysis
can help to explore data structures of the investigated samples. 

Enroll with Great Learning Academy’s free courses and upskill today!

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