DEFINITION of 'Degrees Of Freedom'
In statistics, the number of values in a study that are free to vary. For example, if you have to take ten different courses to graduate, and only ten different courses are offered, then you have nine degrees of freedom. Nine semesters you will be able to choose which class to take; the tenth semester, there will only be one class left to take  there is no choice, if you want to graduate.
Degrees of freedom are commonly discussed in relation to chisquare and other forms of hypothesis testing statistics. It is important to calculate the degree(s) of freedom when determining the significance of a chi square statistic and the validity of the null hypothesis.
INVESTOPEDIA EXPLAINS 'Degrees Of Freedom'
There are two types of chi square tests: the goodnessoffit test (does a coin tossed 100 times turn up heads 50 times and tails 50 times?) and the test of independence (is there a relationship between gender and a perfect SAT score?).
Degrees of freedom are used to then determine whether a particular null hypothesis can be rejected based on the number of variables and samples of in the experiment. For example, while a sample size of 50 students might not be large enough to obtain significant information, obtaining the same results from a study of 500 samples can be judged as being valid.

GoodnessOfFit
Used in statistics and statistical modelling to compare an anticipated ... 
Nonparametric Statistics
A statistical method wherein the data is not required to fit ... 
Statistics
A type of mathematical analysis involving the use of quantified ... 
Null Hypothesis
A type of hypothesis used in statistics that proposes that no ... 
Descriptive Statistics
A set of brief descriptive coefficients that summarizes a given ... 
T Distribution
A type of probability distribution that is theoretical and resembles ...

What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?
The parametric method, also known as the variancecovariance method, is a risk management technique for calculating the value ... Read Full Answer >> 
What is backtesting in Value at Risk (VaR)?
The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >> 
How much variance should an investor have in an indexed fund?
An investor should have as much variance in an indexed fund as he is comfortable with. Variance is the measure of the spread ... Read Full Answer >> 
Can the correlation coefficient be used to measure dependence?
The correlation coefficient can be used to measure the linear dependence between two random variables. The most common correlation ... Read Full Answer >> 
How do you calculate variance in Excel?
To calculate statistical variance in Microsoft Excel, use the builtin Excel function VAR. Given a set of numbers value1 ... Read Full Answer >> 
What's the difference between a confidence level and a confidence interval in Value ...
The value at risk (VaR) uses both the confidence level and confidence interval. A risk manager uses the VaR to monitor and ... Read Full Answer >>

Investing Basics
What Are The Odds Of Scoring A Winning Trade?
Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why. 
Investing Basics
Regression Basics For Business Analysis
This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how. 
Active Trading
The Linear Regression Of Time and Price
This investment strategy can help investors be successful by identifying price trends while eliminating human bias. 
Fundamental Analysis
Explaining Expected Return
The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome. 
Fundamental Analysis
Explaining the Geometric Mean
The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio. 
Investing
The Labor Market Recovery’s Missing Ingredient
Job creation is running at the fastest pace since the 90s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly. 
Trading Strategies
Best Undergraduate Degrees For Day Traders
We look at some popular undergrad majors for those wanting to begin a career in the exciting world of fastpaced trading. 
Fundamental Analysis
Explaining Standard Error
Standard error is a statistical term that measures the accuracy with which a sample represents a population. 
Economics
Understanding Economic Order Quantity
Economic order quantity is an inventoryrelated equation that determines the optimum order quantity that a company should hold in its inventory. 
Fundamental Analysis
What is a Null Hypothesis?
In statistics, a null hypothesis is assumed true until proven otherwise.