Manifest Variable

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Will Kenton
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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
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Updated July 21, 2022
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Thomas Brock
Thomas Brock
Reviewed by Thomas Brock
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Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.
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What Is a Manifest Variable?

A manifest variable is a variable or factor that can be directly measured or observed. It is the opposite of a latent variable, which is a factor that cannot be directly observed, and which needs a manifest variable assigned to it as an indicator to test whether it is present.

A manifest variable is also known as an observable variable or a measured variable.

Key Takeaways

  • A manifest variable can be directly studied by a researcher or statistician when charted in a diagram.
  • A manifest variable is the opposite of a latent variable, which is an attribute that is hidden and therefore cannot be directly observed.
  • Latent variable models use manifest variables as a factor to determine whether latent variables exist.
  • Manifest variables are used by researchers who are seeking to analyze and categorize different financial or scientific models.

Understanding Manifest Variable

Statisticians use several analysis techniques when examining manifest variables and latent variables. The four most frequently used models are factor analysis, latent trait analysis, latent profile analysis, and latent class analysis. Which model is ultimately used depends on whether the manifest variables are continuous or categorical, and whether the latent variables are continuous or categorical as well.

Manifest variables are used in latent variable statistical models, which test the relationships between a set of manifest variables and a set of latent variables. A latent variable, which cannot be observed directly, is also known as a factor or a construct.

Comparing manifest and latent variables can help businesses assess factors as seemingly intangible as customer satisfaction, product loyalty, or company reliability. Statisticians also use latent variable models when determining whether a company or stock is a good investment.

Manifest variables, or those that can be observed, are useful is models of latent variables or those that are hidden and are otherwise hard to determine.

Manifest Variable Use Example

Manifest and latent variables can be used to measure factors in business that seem hard to assess on their own, such as customer satisfaction. Actual customer satisfaction is a hidden or latent factor, that can only be measured in comparison to a manifest variable, or observable factor.

Suppose retailer Home Delight wants to get a sense of whether its customers are happy with its new line of throw pillows. Home Delight might hire a statistical research firm or conduct its own internal research to try to determine customer satisfaction. It might conduct surveys, look at comments on retail sites like Amazon where the product is being sold, or conduct more specific research, using manifest variables. The company might choose to study observable variables, such as sales numbers, the price per sale, regional trends of purchasing, the gender of the customer, age of the customer, percentage of return customers, and how high a customer ranked the product on various sites all in the pursuit of the latent factor — namely, customer satisfaction.