ANALYSIS OF VARIANCE

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WHAT IS ANALYSIS OF VARIANCE?

This is a technique which allows us to test whether the differences among more than two sample means are significant or not.

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IMPORTANCE OF ANOVA AS A STATISTICAL TECHNIQUE

The methods used in statistical inferences allows us to test the significance among the means drawn from two populations only. However, in real life there arises situations where it is required to test the significance of the differences among the means & variance drawn from more than two populations. In such situations ANOVA is the appropriate technique.
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ASSUMPTIONS MADE IN ANOVA

The various populations from which the samples are drawn should be normal & have the same variance. The requirement of normalcy can be discarded if the sample is large enough The analysis of variance is based on a comparison of two estimates of the population variance. One estimate is obtained from variance among the sample means & the second is obtained from variation that exists within the samples.
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STEPS IN ANOVA
There are three steps:

To determine an estimate of the population variance from the variance that exists among the sample means To determine an estimate of the population variance from the variance that exists within samples Accept the Ho if the above two estimates are equal or otherwise reject Ho
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CALCULATING THE VARIANCE AMONG THE SAMPLE MEANS

We have to obtain one estimate of the population variance from the variance of the sample means. This estimate is called the between-column variance. Formula for sample variance is: s2 = {(x-x)2}/(n-1) Now as we are observations are themselves the sample means so x is replaced by x; x by x & the n (no. of samples) by k. Thus, variance among sample means is given by: s2x = {(x-x)2}/(k-1)
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CALCULATING THE VARIANCE AMONG THE SAMPLE MEANS contd.

The S.E. of the mean is x = /n or x2 = 2/n or 2 = n. x2 Now if x2 (the S.E. of the sample means) is not known then we can substitute it with sx2 (the variance among the sample means). So we write, ^2 = n. s x2 = {n(x-x)2}/(k-1) Now if different samples have different sizes then the estimate of between-column variance is b^2 = {nj(xj-x)2}/(k-1)
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Symbols explained
Estimate of between-column variance is b^2 = {nj(xj-x)2}/(k-1) Where, b^2 estimate of population variance based on variance among sample means nj size of jth sample xj sample mean of jth sample x grand mean k number of samples
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EXAMPLE
From four premier institutes, the no. of management undergraduates selected were 6,7,8 & 8. The amount they were paid as stipend during their summer internship is shown below in Rs. thousands

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Institute 1
11.00 10.00

Institute 2
8.00 9.00

Institute 3
10.00 11.00

Institute 4
7.75 8.25

9.00
10.50

9.50
9.75

10.50
10.25

8.75
9.00

11.50
12.00

10.00
10.25 10.50

10.75
9.75 9.00 8.50

9.50
10.00 10.50 11.00

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64.00

67.00

79.75

74.75

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CALCULATION OF VARIANCE WITHIN SAMPLE

We have to obtain an estimate of the population variance from the variance that exists within samples. This is referred to as the within-column variance. Now variance within each sample is given by s2 = {(x-x)2}/(n-1)
Because we have assumed that all our populations have same variances, so we can use any one of the three sample variances (s12 or s22 or s32) as the second estimate of the population variance.

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CALCULATION OF VARIANCE WITHIN SAMPLE contd.

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To obtain a statistically better estimate for the population variance we take a weighted average of all the sample variances. The formula is worked out as: We know the variances of the samples are s1, s2.., where sj2 = {(xj-xj)2}/(nj-1). i.e. (xj-xj)2 = (nj-1) sj2. Now, weighted average of all these sample variances are {(nj-1)/(nT k)} sj2

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ESTIMATE OF WITHIN COLUMN VARIANCE

w^2 = {(nj-1)/(nT k)} sj2 where,

w^2 estimate of population variance based
on variance within the samples (within-column variance) nj size of jth sample sj2 sample variance of jth sample k number of samples nT nj = total sample size

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CRITERION FOR ACCEPTING OR REJECTING Ho IN ANOVA

In ANOVA what is done is the F hypothesis testing i.e. ANOVA compares the two estimates of the population variance by computing their ratio which is called Fratio or F statistic.

F = (first estimate of population variance based on variance

among sample means) divided by (second estimate of population variance based on variance within samples) = (between column variance)/ within column variance)

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= b^2 / w^2

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CRITERION FOR ACCEPTING OR REJECTING Ho IN ANOVA

Once the F ratio is obtained, if its value is equal to or close to 1 we accept Ho & if it is greater than 1 we reject it. Logic behind: If the Ho= 1= 2= 3=..,
is true then b^2 = w^2 which implies F= 1. Likewise, when the means are not the same the between column variance (derived from variances among sample means) tends to be greater than the within-column variance & the value of F tends to be larger than 1. thus, Ho is rejected.

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