PLS' Janus Face - Response to Professor Rigdon's 'Rethinking Partial Least Squares Modeling: In Praise of Simple Methods'

I respond to two of the theses put forward by Professor Rigdon: 1. PLS should sever every tie with factor modeling, and 2. The fundamental problem of factor indeterminacy makes factor-based methods fundamentally unsuited to prediction-oriented research. With respect to the first thesis my response is that adherence to its advice would waste a potentially very useful method: there is a version of PLS that appears to be a valuable alternative to the mainstream approaches in factor modeling, both linear and non-linear. The response to the second thesis is that one can generate predictions with factor models, and that all models and techniques are ultimately instruments that transform data into predictions about behavior. Our task is to find out which approach works best in which circumstances. I would not support an a priori exclusion of tools. In an addendum I attempt to sketch the historical path-dependent development of Herman Wold's PLS, in order to elucidate some of its characteristic features. (C) 2014 Elsevier Ltd. All rights reserved.