What is 'Analysis Of Variance - ANOVA'

Analysis of variance (ANOVA) is an analysis tool used in statistics that splits the aggregate variability found inside a data set into two parts: systematic factors and random factors. The systematic factors have a statistical influence on the given data set, but the random factors do not. Analysts use the analysis of the variance test to determine the result that independent variables have on the dependent variable amid a regression study.

BREAKING DOWN 'Analysis Of Variance - ANOVA'

The analysis of variance test is the initial step in analyzing factors that affect a given data set. Once the analysis of variance test is finished, an analyst performs additional testing on the methodical factors that measurably contribute to the data set's inconsistency. The analyst utilizes the analysis of the variance test results in an f-test to generate additional data that aligns with the proposed regression models.

The test allows comparison of more than two groups at the same time to determine whether a relationship exists between them. The test analyzes multiple groups to determine the types between and within samples. For example, a researcher might test students from multiple colleges to see if students from one of the colleges consistently outperform the others. Also, an R&D researcher might test two different processes of creating a product to see if one process is better than the other in terms of cost efficiency.

How to Use ANOVA

The type of ANOVA run depends on a number of factors. It is applied when data needs to be experimental. Analysis of variance is employed if there is no access to statistical software resulting in computing ANOVA by hand. It is simple to use and best suited for small samples. With many experimental designs, the sample sizes have to be the same for the various factor level combinations.

Analysis of variances is helpful for testing three or more variables. It is similar to multiple two-sample t-tests. However, it results in fewer type I errors and is appropriate for a range of issues. ANOVA groups differences by comparing the means of each group, and includes spreading out the variance into diverse sources. It is employed with subjects, test groups, between groups and within groups.

Types of ANOVA

There are two types of analysis of variance: one-way (or unidirectional) and two-way. One-way or two-way refers to the number of independent variables in your Analysis of Variance test. A one-way ANOVA evaluates the impact of a sole factor on a sole response variable. It determines whether all the samples are the same. The one-way ANOVA is used to determine whether there are any statistically significant differences between the means of three or more independent (unrelated) groups.

A two-way ANOVA is an extension of the one-way ANOVA. With a one-way, you have one independent variable affecting a dependent variable. With a two-way ANOVA, there are two independents. For example, a two-way ANOVA allows a company to compare worker productivity based on two independent variables, say salary and skill set. It is utilized to observe the interaction between the two factors. It tests the effect of two factors at the same time.

History

The t- and z-tests developed in the 20th century were used until 1918, when Ronald Fisher created the analysis of variance. ANOVA is also called the Fisher analysis of variance, and it is the extension of the t- and the z-tests. The term became well-known in 1925, after appearing in Fisher's book, "Statistical Methods for Research Workers." It was employed in experimental psychology and later expanded to subjects that are more complex.

The formula for F used in ANOVA is F = between group variance estimate (MSB) divided by the group variance estimate (MSW), where F = MSB/MSW. Every variance estimate has two parts, the sum of squares and the rim (SSB and SSW) and degrees of freedom (df).

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