Probabilistic SEM : an augmentation to classical Structural equation modelling

Abstract

Structural equation modelling (SEM) is carried out with the aim of testing hypotheses on the model of the researcher in a quantitative way, using the sampled data. Although SEM has developed in many aspects over the past few decades, there are still numerous advances which can make SEM an even more powerful technique. We propose representing the nal theoretical SEM by a Bayesian Network (BN), which we would like to call a Probabilistic Structural Equation Model (PSEM). With the PSEM, we can take things a step further and conduct inference by explicitly entering evidence into the network and performing di erent types of inferences. Because the direction of the inference is not an issue, various scenarios can be simulated using the BN. The augmentation of SEM with BN provides signi cant contributions to the eld. Firstly, structural learning can mine data for additional causal information which is not necessarily clear when hypothesising causality from theory. Secondly, the inference ability of the BN provides not only insight as mentioned before, but acts as an interactive tool as the `what-if' analysis is dynamic.