According to the model used in ordinary factor analysis, the observations xi are weighted sums of underlying latent variables. In other words, the dependences between the different components in an observation vector are assumed to be caused by common factors. For consistency with the rest of the thesis, the factors will be denoted by s, although according to the usual convention they would be denoted by f.
The linear summation model is quite simple and it is reasonable to assume there are inaccuracies in the model and many other causes for the observations besides the factors included in the model. The effect of the inaccuracies and other causes is summarised by Gaussian noise n. In anticipation of the dynamic model, the observations are indexed by t referring to time, although in the usual factor analysis model, observations at different time instants are assumed to be independent of each other and the observations therefore need not form a sequence in time.
The linear factor analysis model can be written as
The model can be written in a vector form as
|x(t) = A s(t) + a + n(t).||(26)|
If the variances of the Gaussian noise terms ni(t) are denoted by
, the probability which the model gives for the
observation xi(t) can be written as
For mathematical convenience, the factors are assumed to have Gaussian distributions in the standard factor analysis model. Recall that the Gaussian distribution emerges if a large number of independent variables are summed linearly. Effectively the Gaussian model for factors then means that the factors are themselves assumed to be caused by various other factors. For many purposes this may be a suitable simplification but it means that the Gaussian factor analysis model is not able to reveal the original independent causes of the observations even if there would be some. Mathematically, this manifests itself in the fact that a multivariate Gaussian distribution with equal variances for all factors is spherically symmetric. Any rotation of the variables will leave the distribution unchanged, and therefore there is a rotational indeterminacy in the model. If the variances of the factors differ, the indeterminacy still exists but the corresponding rotation is non-orthogonal.
From a practical point of view this means that the Gaussian model is able to capture only the second order correlation structure of the components of the observation vectors. Additional criteria can be used to fix the rotation of the matrix A, but it is usually not reasonable to directly interpret the factors as the original independent causes of the observations.