The Elephant in the Room: Evaluating the Predictive Performance of Partial Least Squares (PLS) Path Models

31 Pages Posted: 12 Sep 2015

See all articles by Galit Shmueli

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan

Soumya Ray

National Tsing Hua University, Taiwan

Juan Velasquez Estrada

National Tsing Hua University

Suneel Chatla

Institute of Service Science, National Tsing Hua University

Date Written: September 11, 2015

Abstract

Attempts to introduce predictive performance metrics into Partial Least Squares (PLS) path modeling have been slow and fall short of demonstrating impact on both practice and scientific development in PLS. This study contributes to PLS development by offering a comprehensive framework that identifies different dimensions of prediction and their effect on predictive performance evaluation with PLS. We use this framework to contextualize prior efforts in PLS and prediction, and to highlight potential opportunities and challenges. Our second contribution is to formally propose procedures to generate and evaluate different types of predictions from PLS models. The procedures account for the best practices identified in our framework. Our third contribution is outlining the many powerful ways in which predictive PLS methodologies can strengthen theory­ building research. Our framework, procedures, and research guidelines will hopefully form the basis for a more informed and unified development of the rigorous theoretical and practical applications of PLS.

Keywords: Partial Least Squares, Path Modeling, Prediction, Predictive Performance, Out-­of-sample prediction, Casewise Prediction

Suggested Citation

Shmueli, Galit and Ray, Soumya and Velasquez Estrada, Juan and Chatla, Suneel, The Elephant in the Room: Evaluating the Predictive Performance of Partial Least Squares (PLS) Path Models (September 11, 2015). Available at SSRN: https://ssrn.com/abstract=2659233 or http://dx.doi.org/10.2139/ssrn.2659233

Galit Shmueli (Contact Author)

Institute of Service Science, National Tsing Hua University, Taiwan ( email )

Hsinchu, 30013
Taiwan

HOME PAGE: http://www.iss.nthu.edu.tw

Soumya Ray

National Tsing Hua University, Taiwan ( email )

No. 101, Sec. 2, Kuang Fu Rd
Hsinchu, 30013
Taiwan

HOME PAGE: http://soumyaray.com

Juan Velasquez Estrada

National Tsing Hua University ( email )

Hsin Chu 3
China

Suneel Chatla

Institute of Service Science, National Tsing Hua University ( email )

Hsinchu, Hsinchu 30013
Taiwan

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