Hi Gavin and Mauricio
Thanks a lot for bringing this discussion up. I totally understand your points. Regarding cut-off points I agree that relying only on these numbers are misleading. But at the end of the day, researchers and reviewers of the academic journals may rely on certain cut-off points for accepting a paper. The discussion of homogeneity was also interesting because I come from finance background and I was not familiar with it. Since this topic came up, I would like to elaborate a bit more on my scale items:
There are different sets of questions in two separate modules of a certain survey data. One of them is asking about
self-reported risk aversion of individuals:
"Which of the statements on the card comes closest to the amount of financial risk that you are willing to take when you save or make investments?
1. Take substantial financial risks expecting to earn substantial returns
2. Take above average financial risks expecting to earn above average returns
3. Take average financial risks expecting to earn average returns
4. Not willing to take any financial risks.”
I made a binary out of above question (if 4 is chosen =0, otherwise 1)
The other two manifest variables comes from answering to questions about stock ownership (yes or no) and mutual fund ownership (yes or no).
As you can see there is no homogeneity in these questions and I thought that it would be better to make a latent construct which reflects both self reported risk aversion and real risky asset ownership of individuals. Please correct me if this idea is wrong.
The summary results of lavaan is:
>Latent Variables:
> Estimate Std.Err z-value P(>|z|) Std.lv Std.all
> latent =~
> risk.tolernc.b 1.000 0.703 0.703
> stock 1.089 0.027 40.777 0.000 0.766 0.766
> mut.fund 1.058 0.026 40.429 0.000 0.743 0.743
>Variances:
> Estimate Std.Err z-value P(>|z|) Std.lv Std.all
> .risk.tolernc.b 0.506 0.506 0.506
> .stock 0.413 0.413 0.413
> .mut.fund 0.447 0.447 0.447
> latent 0.494 0.016 30.828 0.000 1.000 1.000
> R-Square:
> Estimate
> risk.tolernc.b 0.494
> stock 0.587
> mut.fund 0.553
Once again, I really appreciate the time you put for answering such long posts in this group.
All the best,