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Abstract 

We conducted a Monte Carlo study to investigate the performance of the polychoric instrumental variable estimator (PIV) in comparison to unweighted least squares (ULS) and diagonally weighted least squares (DWLS) in the estimation of a confirmatory factor analysis model with dichotomous indicators. The simulation involved 144 conditions (1,000 replications per condition) that were defined by a combination of (a) two types of latent factor models, (b) four sample sizes (100, 250, 500, 1,000), (c) three factor loadings (low, moderate, strong), (d) three levels of non-normality (normal, moderately, and extremely non-normal), and (e) whether the factor model was correctly specified or misspecified. The results showed that when the model was correctly specified, PIV produced estimates that were as accurate as ULS and DWLS. Furthermore, the simulation showed that PIV was more robust to structural misspecifications than ULS and DWLS.