This paper reviews various treatments of non-metric variables in Partial Least Squares (PLS) and Principal Component Analysis (PCA) algorithms. The performance of different treatments is compared in the extensive simulation study under several typical data generating processes and...

In this paper, we compare Principal Component Analysis (PCA) and Partial Least Squares (PLS) methods to generate weights for composite indices. In this context we also consider various treatments of non-metric variables when constructing such composite indices. Using simulation studies we find...