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Open Access Analytic perspective

The risk of misclassifying subjects within principal component based asset index

MA Yushuf Sharker1*, Mohammed Nasser2, Jaynal Abedin1, Benjamin F Arnold3 and Stephen P Luby4

Author Affiliations

1 icddr,b, 68 Shahid Tajuddin Ahamed Sarani, Mohakhali, 1212 Dhaka, Bangladesh

2 Department of Statistics, University of Rajshahi, 6205 Rajshahi, Bangladesh

3 School of Public Health, University of California, Berkeley, USA

4 Global Disease Detection Branch, Division of Global Health Protection, Center for Global Health, Centers for Disease Control and Prevention, Georgia, USA

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Emerging Themes in Epidemiology 2014, 11:6  doi:10.1186/1742-7622-11-6

Published: 18 June 2014

Abstract

The asset index is often used as a measure of socioeconomic status in empirical research as an explanatory variable or to control confounding. Principal component analysis (PCA) is frequently used to create the asset index. We conducted a simulation study to explore how accurately the principal component based asset index reflects the study subjects’ actual poverty level, when the actual poverty level is generated by a simple factor analytic model. In the simulation study using the PC-based asset index, only 1% to 4% of subjects preserved their real position in a quintile scale of assets; between 44% to 82% of subjects were misclassified into the wrong asset quintile. If the PC-based asset index explained less than 30% of the total variance in the component variables, then we consistently observed more than 50% misclassification across quintiles of the index. The frequency of misclassification suggests that the PC-based asset index may not provide a valid measure of poverty level and should be used cautiously as a measure of socioeconomic status.

Keywords:
Principal component analysis; Socio-economic status; Asset index; Wealth index