In statistics, a **latent class model** (**LCM**) relates a set of observed (usually discrete) multivariate variables to a set of latent variables. It is a type of latent variable model. It is called a latent class model because the latent variable is discrete. A class is characterized by a pattern of conditional probabilities that indicate the chance that variables take on certain values.

**Latent class analysis** (**LCA**) is a subset of structural equation modeling, used to find groups or subtypes of cases in multivariate categorical data. These subtypes are called “latent classes”.^{[1][2]}

Confronted with a situation as follows, a researcher might choose to use LCA to understand the data: Imagine that symptoms a-d have been measured in a range of patients with diseases X Y and Z, and that disease X is associated with the presence of symptoms a, b, and c, disease Y with symptoms b, c, d, and disease Z with symptoms a, c and d.

The LCA will attempt to detect the presence of latent classes (the disease entities), creating patterns of association in the symptoms. As in factor analysis, the LCA can also be used to classify case according to their maximum likelihood class membership.^{[1]}

Because the criterion for solving the LCA is to achieve latent classes within which there is no longer any association of one symptom with another (because the class is the disease which causes their association), and the set of diseases a patient has (or class a case is a member of) causes the symptom association, the symptoms will be “conditionally independent”, i.e., conditional on class membership, they are no longer related.^{[1]}

Related methods

There are a number of methods with distinct names and uses that share a common relationship. Cluster analysis is, like LCA, used to discover taxon-like groups of cases in data. Multivariate mixture estimation (MME) is applicable to continuous data, and assumes that such data arise from a mixture of distributions: imagine a set of heights arising from a mixture of men and women. If a multivariate mixture estimation is constrained so that measures must be uncorrelated within each distribution it is termed latent profile analysis. Modified to handle discrete data, this constrained analysis is known as LCA. Discrete latent trait models further constrain the classes to form from segments of a single dimension: essentially allocating members to classes on that dimension: an example would be assigning cases to social classes on a dimension of ability or merit.

As a practical instance, the variables could be multiple choice items of a political questionnaire. The data in this case consists of a N-way contingency table with answers to the items for a number of respondents. In this example, the latent variable refers to political opinion and the latent classes to political groups. Given group membership, the conditional probabilities specify the chance certain answers are chosen.

Application

LCA may be used in many fields, such as: collaborative filtering,^{[3]} *Behavior Genetics*^{[4]} and Evaluation of diagnostic tests.^{[5]}

References

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^{a}^{b}Lazarsfeld, P.F. and Henry, N.W. (1968)^{c}*Latent structure analysis*. Boston: Houghton Mifflin **^**Formann, A. K. (1984).*Latent Class Analyse: Einführung in die Theorie und Anwendung [Latent class analysis: Introduction to theory and application]*. Weinheim: Beltz.**^***Cheung, Kwok-Wai; Tsui, Kwok-Ching; Liu, Jiming (2004). “Extended latent class models for collaborative recommendation”. IEEE Transactions on Systems, Man, and Cybernetics – Part A: Systems and Humans.***34**(1): 143–148. CiteSeerX 10.1.1.6.2234. doi:10.1109/TSMCA.2003.818877.**^***Eaves, L. J., Silberg, J. L., Hewitt, J. K., Rutter, M., Meyer, J. M., Neale, M. C., & Pickles, A (1993). “Analyzing twin resemblance in multisymptom data: genetic applications of a latent class model for symptoms of conduct disorder in juvenile boys”. Behavior Genetics.***23**(1): 5–19. doi:10.1007/bf01067550. PMID 8476390.**^***Bermingham, M. L., Handel, I. G., Glass, E. J., Woolliams, J. A., de Clare Bronsvoort, B. M., McBride, S. H., Skuce, R. A., Allen, A . R., McDowell, S. W. J., & Bishop, S. C. (2015). “Hui and Walter’s latent-class model extended to estimate diagnostic test properties from surveillance data: a latent model for latent data”. Scientific Reports.***5**: 11861. doi:10.1038/srep11861. PMC 4493568. PMID 26148538.

*Linda M. Collins; Stephanie T. Lanza (2010). Latent class and latent transition analysis for the social, behavioral, and health sciences. New York: Wiley. ISBN 978-0-470-22839-5.**Allan L. McCutcheon (1987). Latent class analysis. Quantitative Applications in the Social Sciences Series No. 64. Thousand Oaks, California: Sage Publications. ISBN 978-0-521-59451-6.**Leo A. Goodman (1974). “Exploratory latent structure analysis using both identifiable and unidentifiable models”. Biometrika.***61**(2): 215–231. doi:10.1093/biomet/61.2.215.*Paul F. Lazarsfeld, Neil W. Henry (1968). Latent Structure Analysis.*

Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.