Improving parameter tests in covariance structure analysis
Computational Statistics & Data Analysis
A well-conditioned estimator for large-dimensional covariance matrices
Journal of Multivariate Analysis
Journal of Multivariate Analysis
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Conventional structural equation modeling involves fitting a structural model to the sample covariance matrix S. Due to collinearity or small samples with practical data, nonconvergences often occur in the estimation process. For a small constant a, this paper proposes to fit the structural model to the covariance matrix S"a=S+aI. When treating S"a as the sample covariance matrix in the maximum likelihood (ML) procedure, consistent parameter estimates are still obtained. The asymptotic distributions of the parameter estimates and the corresponding likelihood ratio statistic are studied and compared to those by the conventional ML. Two rescaled statistics for the overall model evaluation with modeling S"a are constructed. Empirical results imply that the estimates from modeling S"a are more efficient than those of fitting the structural model to S even when data are normally distributed. Simulations and real data examples indicate that modeling S"a allows us to evaluate the overall model structure even when S is literally singular. Implications of modeling S"a in a broader context are discussed.