I wish to fit a model in which one latent variable is regressed on 2 other latent variables and their interaction (plus an observed covariate, gender). The indicators for each factor are measured on a 5 point, ordinal scale. I fitted the model treating the indicators as continuous using MLR. I then fitted the model treating the indicators as CATEGORICAL, also using MLR. Can you recommend any diagnostic procedures to determine which set of analysis is most appropriate?
If your variables are ordinal, the most appropriate way to treat them is as categorical variables. If your 5 point variables do not have strong floor or ceiling effects, you can probably treat them as continuous will little ill effect.