Analysis Of Variance - ANOVA

AAA

DEFINITION of 'Analysis Of Variance - ANOVA'

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.

INVESTOPEDIA EXPLAINS '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. Variance

    The spread between numbers in a data set, measuring Variance ...
  2. Yield Variance

    The difference between actual output and standard output of a ...
  3. Balanced ANOVA

    A statistical test used to determine whether or not different ...
  4. Bonferroni Test

    A type of multiple comparison test used in statistical analysis. ...
  5. Data Smoothing

    The use of an algorithm to remove noise from a data set, allowing ...
  6. Greeks

    Dimensions of risk involved in taking a position in an option ...
RELATED FAQS
  1. What does the rule of 70 indicate about a country's future economic growth?

    The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >>
  2. How is the rule of 70 related to the growth rate of a variable?

    The rule of 70 is related to the growth rate of a variable because it uses the growth rate in its approximation of the number ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Related Articles
  1. Markets

    Using Historical Volatility To Gauge Future Risk

    Use these calculations to uncover the risk involved in your investments.
  2. Markets

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  3. 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.
  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. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. 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 ...
  4. Moving Average - MA

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

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

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