Random Factor Analysis

AAA

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.

INVESTOPEDIA EXPLAINS '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. Survival Analysis

    A branch of statistics which studies the amount of time that ...
  2. Investment Analysis

    The study of how an investment is likely to perform and how ...
  3. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  4. Trend

    The general direction of a market or of the price of an asset. ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  3. What types of assets produce negative portfolio variance?

    Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the ... Read Full Answer >>
  4. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>
  5. What are some common financial sampling methods?

    There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>
  6. How can I measure portfolio variance?

    Portfolio variance measures the dispersion of returns of a portfolio. It is calculated using the standard deviation of each ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Simple Moving Averages Make Trends Stand Out

    The moving average is easy to calculate and, once plotted on a chart, is a powerful visual trend-spotting tool.
  2. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  3. Trading Strategies

    Introduction To Technical Analysis Price Patterns

    To "find your game" in technical analysis, you need to be able to recognize reversals and continuations as they form.
  4. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  5. Active Trading

    Peak-and-Trough Analysis

    Prices never move in straight lines, so it's time to learn about this powerful trend-following technique.
  6. Investing

    Using Technical Analysis In The Gold Markets

    The quest for this shiny commodity has made millionaires of paupers and, on the flip side, ruined many an investor.
  7. Personal Finance

    Testing 3 Types Of Analysts

    Different clients require different research reports. Which type of analyst do you need?
  8. Economics

    Explaining the Liquidity Coverage Ratio

    The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress.
  9. Fundamental Analysis

    Calculating Valuation

    Valuation is the process of determining what an asset is worth.
  10. Economics

    Will the Selloff in China Hurt the Global Economy?

    Though China is the world’s second largest economy, its volatility in the stock market is unlikely to have an impact on the global or Chinese economy.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!