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. Covariance

    A measure of the degree to which returns on two risky assets ...
  6. Mean

    The simple mathematical average of a set of two or more numbers. ...
RELATED FAQS
  1. What is a "linear" exposure in Value at Risk (VaR) calculation?

    A linear exposure in the value-at-risk, or VaR, calculation is represented by positions in stocks, bonds, commodities or ... Read Full Answer >>
  2. What is the criteria for a simple random sample?

    Simple random sampling is the most basic form of sampling and can be a component of more precise, more complex sampling methods. ... Read Full Answer >>
  3. What are some examples of ways that sensitivity analysis can be used?

    Sensitivity analysis is an analysis method that is used to identify how much variations in the input values for a given variable ... Read Full Answer >>
  4. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  5. How is the 80-20 rule (Pareto's Principle) used in macroeconomics?

    The 80-20 rule was first used in macroeconomics to describe the distribution of wealth in Italy in the early 20th century, ... Read Full Answer >>
  6. What are some of the uses of the coefficient of variation (COV)?

    In statistics, the coefficient of variation (COV) is a simple measure of relative event dispersion. It is equal to the ratio ... 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

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  6. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  7. Investing

    The Strong Dollar’s (Real) Toll On Tech Stocks

    A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms.
  8. Fundamental Analysis

    How to Calculate a Coverage Ratio

    In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
  9. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  10. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center