I have 26 binary variables (Yes and No) and want to do Cluster Analysis (my sample size is 275), some references suggest to do factor analysis or principal component analysis on the binary variables first and then saving the factor or component scores as new variables and finally clustering the cases on the basis of those scores. Thus, the data being clustered are no longer binary.

My questions are:

1- Can I do factor analysis on binary data?

2- I also have 8 low observation variables, should I exclude them from my analysis or I should let the factor analysis decide about them?

3- Do you suggest any other analysis for Binary data?

I appreciate any comment and advice.

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