Analysis Of Variances - ANOVA

AAA

DEFINITION of 'Analysis Of Variances - ANOVA'

An analysis of the variation between all of the variables used in an experiment. Analysis of variance is used in finance in several different ways, such as to forecasting the movements of security prices by first determining which factors influence stock fluctuations. This analysis can provide valuable insight into the behavior of a security or market index under various conditions.

INVESTOPEDIA EXPLAINS 'Analysis Of Variances - ANOVA'

This type of analysis attempts to break down the various underlying factors that determine the price of securities as well as market behavior. For example, it could possibly show how much of a security's rise or fall is due to changes in interest rates. A t-test and f-test is used to analyze the results of an analysis of variance test to determine which variables are of statistical significance.

RELATED TERMS
  1. Variance

    The spread between numbers in a data set, measuring Variance ...
  2. T-Test

    A statistical examination of two population means. A two-sample ...
  3. Balanced ANOVA

    A statistical test used to determine whether or not different ...
  4. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  5. Mean

    The simple mathematical average of a set of two or more numbers. ...
  6. Covariance

    A measure of the degree to which returns on two risky assets ...
RELATED FAQS
  1. How do I use the rule of 72 to estimate compounding periods?

    The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>
  2. How can I use Bollinger Bands® to spot options trading opportunities?

    Traders can use Bollinger Bands in a couple of different types of trading strategies. The most common strategy is using Bollinger ... Read Full Answer >>
  3. How can I run linear and multiple regressions in Excel?

    The first step in running regression analysis in Excel is verifying that your software has the capabilities to perform the ... Read Full Answer >>
  4. How do I calculate a modified duration using Matlab?

    The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >>
  5. How do I calculate the rule of 72 using Matlab?

    In finance, the rule of 72 is a useful shortcut to assess how long it takes an investment to double given its annual growth ... Read Full Answer >>
  6. How do I calculate the standard error using Matlab?

    In statistics, the standard error is the standard deviation of the sampling statistical measure, usually the sample mean. ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  2. Active Trading Fundamentals

    How To Convert Value At Risk To Different Time Periods

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  3. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  4. Active Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
  5. Fundamental Analysis

    Understanding the Profitability Index

    The profitability index (PI) is a modification of the net present value method of assessing an investment’s attractiveness.
  6. Economics

    What is Neoliberalism?

    Neoliberalism is a little-used term to describe an economy where the government has few, if any, controls on economic factors.
  7. Fundamental Analysis

    Explaining the Monte Carlo Simulation

    Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes.
  8. Economics

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  9. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  10. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!