Investopedia

Degrees Of Freedom

Filed Under »
Dictionary Says

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 chi-square 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 Says

Investopedia explains 'Degrees Of Freedom'

There are two types of chi square tests: the goodness-of-fit 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.



Articles Of Interest

  1. 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.
  2. Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.
  3. The Linear Regression Of Time and Price

    This investment strategy can help investors be successful by identifying price trends while eliminating human bias.
  4. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
  5. Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
  6. R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.
  7. Mitigating Downside With The Sortino Ratio

    Differentiate between good and bad volatility with the Sortino Ratio.
  8. Quantitative Analysis Of Hedge Funds

    Hedge fund analysis requires more than just the metrics used to analyze mutual funds.
  9. Rule Of 72

    Learn more about this quick approximation that can determine roughly the number of years it'll take your money to double.
  10. How To Use Facebook As A Marketing Tool

    Facebook can be a viable marketing platform for your business. It can even earn you revenue.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Economy And Economics [1] => Economics )