Introduction to Structural Equations with Latent Variables

Goodness-of-fit Statistics

In addition to the chi-square test, there are many other statistics for assessing the goodness of fit of the predicted correlation or covariance matrix to the observed matrix.

Akaike's (1987) information criterion (AIC) and Schwarz's (1978) Bayesian criterion (SBC) are useful for comparing models with different numbers of parameters -the model with the smallest value of AIC or SBC is considered best. Based on both theoretical considerations and various simulation studies, SBC seems to work better, since AIC tends to select models with too many parameters when the sample size is large.

There are many descriptive measures of goodness of fit that are scaled to range approximately from zero to one: the goodness of fit index (GFI) and GFI adjusted for degrees of freedom (AGFI) (J $\ddot{o}$ reskog and S $\ddot{o}$ rbom 1988), centrality (McDonald 1989), and the parsimonious fit index (James, Mulaik, and Brett 1982). Bentler and Bonett (1980) and Bollen (1986) have proposed measures for comparing the goodness of fit of one model with another in a descriptive rather than inferential sense.

None of these measures of goodness of fit are related to the goodness of prediction of the structural equations. Goodness of fit is assessed by comparing the observed correlation or covariance matrix with the matrix computed from the model and parameter estimates. Goodness of prediction is assessed by comparing the actual values of the endogenous variables with their predicted values, usually in terms of root mean squared error or proportion of variance accounted for (R²). For latent endogenous variables, root mean squared error and R² can be estimated from the fitted model.

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