How to create index using Principal component analysis (PCA) in Stata

This is a step by step guide to create index using PCA in STATA. I have used financial development variables to create index.
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[polinakoriukina]

Thank you so much, I couldn't figure it out for hours until I found this video. Literally a lifesaver

[Munyaldhinoooo]

Thank you!!! You have simplified this process so well and understandable even by non-experts!!

[khadimhussainmalik]

Dear Sohaib Ameer. Being a professional we must follow the ethics and rules of every profession. You just run the pca command and predict the index without going in details analysis of the reslults. WE must ensure the credibility and reliability of the index that is going to represent an issue in the research paper.
As I know the process of PCA is not much easy as you explained here. There are lots of things that being a researcher we must ensure.

[frmabhijit]

All variables are having positive values. But, your FD index is having both positive and negative values. As I understand, the index should not have negative values. How to interpret the negative index values?

[yapshen]

Thank you very useful. I want to construct an index using two-step PCA. This is the first step. Is it possible to shed light on 2 things:

1. How to carry out 2nd step when I get the results (prediction) from each dimension?
2. How to convert the result (prediction) to an index between 0 and 1

[Mat-mtpk]

Thank you. But I see one mistake. You found that it makes sense to take two components of the pca operation since it was showing an eigenvalue greater than 1 for the first 2 components, then why did you predict only the first component. This will lose a lot of information.
You should've used: predict pc1 pc2

[kibromadinoabate]

It is more informative video, thank you so much for that. How about if we have binary response for items (like tv) and combination with continuous variable (number of bicycle)? Can we use pca or polychoric pca?

One more, what is the implication of negative fd value in you output?

[skmosharafhossain]

Many thanks for this video. Very helpful. I want to understand a basic thing. Why is the weighted index value (here the fd) more than 1? It should ideally be 0-1. Can you please clear my doubt.

[lutfaferdous]

Many thanks Sohaib. It was a great video

[adnansabzi]

thank you sir really more informative, sir if its possible plz upload a video about extreme bound analysis

[johnnyzhao]

Why you have to rotate the original PCA?

[kibromadinoabate]

Thank you so much. Would you help us know the questionnaire for regular PCA and polychoric PCA? Is there difference among them on variable indicators ?

[khalilrahman]

Sir if we have some variable which is negatively related and some have positive relationship, so what should we do in that case.
In normalization we have two different formulas for negative and positive relationship with defended variable for index making through normalization and aggrigation, but my question is what should we do if we apply PCA

[Jatindersingh-wohf]

You should clarify the basics like why PCA on which type of variables PCA is applicable. Hiw to scale different variables etc.

[esanmathew-cs]

Hello, I need information on how to calculate Livelihood Vulnerability Index. Thanks

[PeaceinPod]

Sir how to find out the concentration index of inequality using STATA?

[naallahbiliqees]

Well done sir, please i want to compute index also but some observations are missing, what do i do. Secondly, in one of the dimensions only one indicator has variable other do not, please how can i calculate the index

[SONALISINGH-djjg]

please tell which variables you have used to make FD

[nomanrasheed]

Do stata standardized variables automatically?as you haven't standardized the variables. variables with different scales need standardization.

[Garrettthethief]

Hi there. You forgot about saying, that the predict is only accurate for this model used. Do you know an alternative for the predict command via mean index as well?