TY - JOUR
T1 - Modeling indices using partial least squares
T2 - How to determine the optimum weights?
AU - Dirsehan, Taşkın
AU - Henseler, Jörg
N1 - Funding Information:
Jörg Henseler gratefully acknowledges financial support from FCT Fundação para a Ciência e a Tecnologia (Portugal), national funding through a research grant from the Information Management Research Center – MagIC/NOVA IMS (UIDB/04152/2020).
Publisher Copyright:
© 2022, The Author(s).
PY - 2022/10/29
Y1 - 2022/10/29
N2 - Indices are often used to model theoretical concepts in economics and finance. Beyond the econometric models used to test the relationships between these variables, partial least squares path modeling (PLS-PM) allows the study of complex models, but it is an estimator that is still in its infancy in economics and finance research. Thus, the use of PLS-PM for composite analysis needs to be explored further. As one such attempt, this paper is focused on the determination of the indices’ optimum weights. For this purpose, the effects of the market potential index (MPI) on foreign direct investment (FDI) and gross domestic product (GDP) were analysed by implementing different weighting schemes. The assessment of the model shows that PLS Mode B leads to better model fit.
AB - Indices are often used to model theoretical concepts in economics and finance. Beyond the econometric models used to test the relationships between these variables, partial least squares path modeling (PLS-PM) allows the study of complex models, but it is an estimator that is still in its infancy in economics and finance research. Thus, the use of PLS-PM for composite analysis needs to be explored further. As one such attempt, this paper is focused on the determination of the indices’ optimum weights. For this purpose, the effects of the market potential index (MPI) on foreign direct investment (FDI) and gross domestic product (GDP) were analysed by implementing different weighting schemes. The assessment of the model shows that PLS Mode B leads to better model fit.
KW - UT-Hybrid-D
U2 - 10.1007/s11135-022-01515-5
DO - 10.1007/s11135-022-01515-5
M3 - Article
JO - Quality and quantity
JF - Quality and quantity
SN - 0033-5177
ER -