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Average Variance Extracted (AVE)

Statistics & analysis

Definition

The average share of variance a latent construct captures from its indicators; AVE of 0.50 or higher supports convergent validity.

AVE is the average proportion of variance a latent construct explains in its own indicators, computed as the mean of the squared standardised loadings. It is the standard measure of convergent validity in both CFA and PLS-SEM.

The accepted threshold is 0.50. At or above it, the construct explains more of its indicators' variance than measurement error does; below it, the items carry more error than signal. The usual remedies are dropping weakly loading indicators or reconsidering whether the items genuinely tap a single construct.

AVE also underpins the Fornell-Larcker criterion for discriminant validity, which requires the square root of a construct's AVE to exceed its correlation with every other construct. Because Fornell-Larcker is now regarded as less sensitive than the HTMT ratio, many reviewers expect to see both reported.

Where it's used

  • Assessing convergent validity of measurement models in SEM

Software used

SmartPLSAMOSR

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