DEFINITION of 'Random Factor Analysis'

A statistical analysis performed to determine the origin of random data figures collected. Random factor analysis is used to decipher whether the outlying data is caused by an underlying trend or just simply random occurring events and attempts to explain the apparently random data. It uses multiple variables to more accurately interpret the data.

BREAKING DOWN 'Random Factor Analysis'

This data is used to help companies better focus their plans on the actual problem. If the random data is caused by an underlying trend or random norecurring event, that trend will need to be addressed and remedied accordingly. For example, consider a random event such as a volcano eruption. Sales of breathing masks may skyrocket, and if someone was just looking at the sales data over a multi-year period this would look like an outlier, but analysis would attribute this data to this random event.

RELATED TERMS
  1. Runs Test

    A statistical procedure that examines whether a string of data ...
  2. Data Smoothing

    The use of an algorithm to remove noise from a data set, allowing ...
  3. Simple Random Sample

    A subset of a statistical population in which each member of ...
  4. Random Variable

    A variable whose value is unknown or a function that assigns ...
  5. Log-Normal Distribution

    A statistical distribution of random variables which have a normally ...
  6. Random Walk Theory

    The theory that stock price changes have the same distribution ...
Related Articles
  1. Investing

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  2. Trading

    Random Reinforcement: Why Most Traders Fail

    This phenomenon can cause a trader to abandon a proven strategy or risk everything on chance. Find out how to avoid it.
  3. Investing

    Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  4. Investing

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
  5. Investing

    Viewing The Market As Organized Chaos

    Find out how a cat and a ladybug prove markets are both random and efficient.
  6. Investing

    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.
  7. Investing

    Intro to Stationary and Non-Stationary Processes

    Refining data points is the key to applying financial series time data to stock analysis.
  8. Investing

    Monte Carlo Simulation With GBM

    Learn to predict future events through a series of random trials.
  9. Investing

    How Does Sampling Work?

    Sampling is a term used in statistics that describes methods of selecting a pre-defined representative number of data from a larger data population.
  10. Investing

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
RELATED FAQS
  1. What is the "random walk theory" and what does it mean for investors?

    The random walk theory is the occurrence of an event determined by a series of random movements - in other words, events ... Read Answer >>
  2. What are the best selection methods for creating a simple random sample?

    Discover some of the methods that researchers and pollsters utilize to select a simple random sample from a population group ... Read Answer >>
  3. What are the advantages of using a simple random sample to study a larger population?

    Learn how simple random sampling works and what advantages it offers over other sampling methods when selecting a research ... Read Answer >>
  4. What are some examples of stratified random sampling?

    Learn what simple random sampling and stratified random sampling are, some examples of stratified random samples, and how ... 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 criteria for a simple random sample?

    Discover the criterion for taking a simple random sample, in contrast to a systematic random sample, each person selected ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center