Analysis Of Variance - ANOVA

What is 'Analysis Of Variance - ANOVA'

Analysis of variance (ANOVA) is a statistical analysis tool that separates the total variability found within a data set into two components: random and systematic factors. The random factors do not have any statistical influence on the given data set, while the systematic factors do. The ANOVA test is used to determine the impact independent variables have on the dependent variable in a regression analysis.

BREAKING DOWN 'Analysis Of Variance - ANOVA'

The ANOVA test is the initial step in identifying factors that are influencing a given data set. After the ANOVA test is performed, the analyst is able to perform further analysis on the systematic factors that are statistically contributing to the data set's variability. ANOVA test results can then be used in an F-test on the significance of the regression formula overall.

RELATED TERMS
  1. Two-Way ANOVA

    A statistical test used to determine the effect of two nominal ...
  2. Three-Way ANOVA

    A statistical test used to determine the effect of three nominal ...
  3. Balanced ANOVA

    A statistical test used to determine whether or not different ...
  4. Analysis Of Variances - ANOVA

    An analysis of the variation between all of the variables used ...
  5. Random Factor Analysis

    A statistical analysis performed to determine the origin of random ...
  6. Random Variable

    A variable whose value is unknown or a function that assigns ...
Related Articles
  1. Economics

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  2. Professionals

    Regression Analysis

    CFA Level 1 - Regression Analysis
  3. Economics

    Understanding Statistics

    Statistics provide the means to analyze data and then summarize it into a numerical form.
  4. Professionals

    Common Probability Distributions

    CFA Level 1 - Common Probability Distributions - Basics
  5. Investing

    Systematic Risk

    Systematic risk, also known as volatility, non-diversifiable risk or market risk, is the risk everyone assumes when investing in a market. Think of it as the overall, aggregate risk that comes ...
  6. Investing Basics

    Unlevered Beta

    Learn about how this number provides a measure of how much systematic risk a firm's equity has compared to the market.
  7. Fundamental Analysis

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  8. Professionals

    Scenario / What-If Analysis

    We look at some ways that you can evaluate your project.
  9. Economics

    What is Systematic Sampling?

    Systematic sampling is similar to random sampling, but it uses a pattern for the selection of the sample.
  10. Fundamental Analysis

    Explaining Variance

    Variance is a measurement of the spread between numbers in a data set.
RELATED FAQS
  1. How do markets account for systematic risk?

    Find out how market participants deal with systematic risk, or the kind of market risk that cannot be diversified away through ... Read Answer >>
  2. What are the advantages and disadvantages of using systematic sampling?

    Learn about the primary advantages and disadvantages of using a systematic sampling method when conducting research of a ... Read Answer >>
  3. What variables are most important when making a prediction through sensitivity analysis?

    Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >>
  4. What kinds of securities are influenced most by systematic risk?

    Learn what systematic risk is, how investors can measure it with beta and how securities with a beta greater than 1 are most ... Read Answer >>
  5. When is it better to use systematic over simple random sampling?

    Learn when systematic sampling is better than simple random sampling, such as in the absence of data patterns and when there ... Read Answer >>
  6. What is the difference between linear regression and multiple regression?

    Learn the difference between linear regression and multiple regression and how multiple regression encompasses not only linear ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  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. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center