STUDY OF ANOVA TEST

Submitted in partial fulfillment of the requirements for the award of the degree

B.Com. LL.B. (Hons)

Submitted by

Shilpa Singh

Registration No. BC0160044

Submitted to

Dr.P.Kumaresan

TAMIL NADU NATIONAL LAW SCHOOL

TIRUCHIRAPPALLI 620 009

April 2017
 DECLARATION

I Shilpa Singh hereby declare that the work presented in the Project Study of Anova Test,
submitted to the Tamil Nadu National Law School, Tiruchirappali for the part of Examination by
Project is an original record of work carried out by me under the supervision of
Dr.P.KUMARESAN. The contents of this project, in full or in parts, have not been submitted
to any other Institute or University for the award of any degree or diploma, membership,
fellowship, associate ship etc. In keeping with the general practice in reporting scientific
observation, due acknowledgement has been made whenever the work described is based on the
findings of other investigators.

Place: Tiruchirappali

Date: 28th April, 2017 Shilpa Singh

 Acknowledgement

Im using this opportunity to express my gratitude to everyone who supported me throughout the
course of this Business Statistics project on the topic Study of Anova test. Im thankful for their
aspiring guidance, invaluably constructive criticism and friendly advice during the project work.
Im sincerely grateful to them for sharing their truthful and illuminating views on a number of
issues related to the project.

I express my warm thanks to Mrs. Kamla Shankaran Vice Chancellor of Tamil Nadu National
Law School. I would also like to thank Dr. P.Kumerasan for his support and guidance at every
juncture.
 ABSTRACT

The one-way analysis of variance (ANOVA) is used to determine whether there are any
statistically significant differences between the means of three or more independent (unrelated)
groups. For example, difference in IQ can be assessed by Country, and County can have 2, 20, or
more different Countries in that variable. The one-way ANOVA compares the means between
the groups you are interested in and determines whether any of those means are statistically
significantly different from each other. Specifically, it tests the null hypothesis:

Where = group mean and k = number of groups. If, however, the one-way ANOVA returns a
statistically significant result, we accept the alternative hypothesis (HA), which is that there are at
least two group means that are statistically significantly different from each otherOne-way anova
has the following test statistics:

Where,

F = ANOVA Coefficient, MST = Mean sum of squares due to treatment, MSE = Mean sum of
squares due to error.

Formula for MST is given below:

Where,

SST = Sum of squares due to treatment, p = Total number of populations, n = Total number of
samples in a population.

Formula for MSE is given below:

Where,

SSE = Sum of squares due to error, S = Standard deviation of the samples, N = Total
number of observations.

INTRODUCTION

Analysis of variance (ANOVA) tests the hypothesis that the means of two or more populations
are equal. ANOVAs assess the importance of one or more factors by comparing the response
variable means at the different factor levels. The null hypothesis states that all population means
(factor level means) are equal while the alternative hypothesis states that at least one is different.
The name "analysis of variance" is based on the approach in which the procedure uses variances
to determine whether the means are different. The procedure works by comparing the variance
between group means versus the variance within groups as a way of determining whether the
groups are all part of one larger population or separate populations with different characteristics.1

TYPES OF ANOVA

There are two types of analysis of variance:

1. One-way (or unidirectional): one-way ANOVA evaluates the impact of a sole factor on a
sole response variable. It determines whether all the samples are the same.

2. Two-way: Two-way ANOVA allows a company to compare worker productivity based on

two independent variables. 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.

1
http://support.minitab.com/en-us/minitab/17/topic-library/modeling-statistics/anova/basics/what-is-anova/
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).

ASSUMPTIONS OF ANOVA:

There are four basic assumptions used in ANOVA.

The expected values of the errors are zero

The variances of all errors are equal to each other
The errors are independent
They are normally distributed

PROBLEM OF ANOVA TEST

Applying ANOVA Test on the 60 days share prices of five different Cement Industries.

Five Cement Industries that has been chosen is:

Table below shows the share prices of past 60 days of all Cement Industries.

1. ACC
2. Ambuja
3. Birla
4. JK
5. Ultratech

Table below shows the share prices of past 60 days of all Cement Industries.

Share Price of Cement Industries for 60 days

ACC (X1) Ambuja (X2) Birla (X3) JK (X4) Ultratech (X5)
1473.8 244.9 742.6 934.8 4058.9
1468.1 242.45 748.35 928.4 4081
1489.75 243.35 750.35 927.8 4111.15
1470.2 238.75 749.9 938.6 4081.25
1446.05 237.55 748.35 943.55 4026.75
1418.95 236.65 739.75 934.95 3984.75
1423.35 234 706.2 909.6 3988.45
1417.2 230.65 704.55 898.9 3999.35
1396.8 228.35 700.55 900.8 3987.3
1396.45 227.6 697.8 899.55 3951.25
1400.75 229.9 693.7 888.6 3974.25
1386.4 232.65 699.25 882.25 3970.25
1413.05 233 699.45 887.55 4007.8
1408.7 237.15 703.4 885.75 3999.8
1411.5 234.2 704.3 899.45 4039.8
1422 234.1 699.7 891.85 4065.55
1420.4 235.4 704.75 898.45 4017.45
1415.4 233 704.9 898.7 3998.95
1400 233.7 703.6 899.6 3852.45
1401.95 229.05 693.7 884.7 3822.85
1397.95 227.15 676.8 860.15 3803.6
1387.35 225.25 695.05 856.05 3786.9
1393.45 224.8 690.55 861.45 3824.1
1393.7 225.4 693.5 863.4 3801.75
1407.85 228.6 699.4 869.8 3817.8
1408.95 228.85 693.3 865.1 3731.1
1411.6 229.35 696.75 868.05 3774.55
1417.5 229.9 703.6 875.85 3737.2
1438.1 232 701.7 886 3786.1
1447.6 233.15 697.85 889.45 3777.8
1467.45 238.95 692.8 879.15 3769.35
1460.65 239.4 711.1 884.8 3756.65
1465.7 238.2 710.35 891.55 3718.5
1455.85 235.65 702.95 899.45 3714.25
1442.9 235.05 706.55 860.7 3678.15
1465.55 237.8 710 846.9 3705.65
1487.55 239.2 716.15 824.05 3767.7
1486.95 237.55 721.55 841.45 3761.9
1485.5 238.4 737.65 850.05 3752.45
1497.1 238.65 725.6 834.85 3717.9
1456.2 234.85 744.5 840.45 3696
1480.15 239.6 749 838.65 3754.85
1423.9 229.25 754.45 788.2 3737.5
 1431.85 231.6 748 801.25 3721.55
1468.55 234.4 746.3 754.7 3779.75
1413.5 229.05 738.3 768.9 3694.45
1428.4 229.45 737 740.1 3693.3
1430.65 232.8 742.9 722.9 3680.4
1399.4 229.15 725.9 737.85 3656.85
1358.6 223.4 720 735.7 3527.8
1334.7 220.1 719.1 716.9 3471.65
1326.45 217.7 706.05 730.3 3501.65
1361.05 220.35 702.1 719.8 3380.25
1349.7 217.55 700.25 709.55 3340.2
1328.9 212.9 695.35 708.85 3319.7
1331 212.5 695.15 717.35 3352.5
1329.5 213.25 694.1 703.2 3352.5
1341.6 214.25 681.55 682.6 3353.1
1371.569167 223.3641667 689.6391667 814.3225 3653.611667

CALCULATING GRAND MEAN

1. Mean of share prices of ACC = 1371.56

2. Mean of share prices of Ambuja = 223.36

3. Mean of share prices of Birla = 689.63

4. Mean of share prices of JK = 814.32

5. Mean of share prices of Ultratech = 3653.61

Grand Mean = X1 + X2+ X3+ X4 + X5

Where, X1, X2, etc. represent the mean of share prices of each bank and N represents the number
of Cement Industries.

Grand mean(X) = 1371.56+ 223.36+ 689.63+ 814.32+ 3653.61

=1350.49
VARIANCE BETWEEN SAMPLES:

Share Price of Cement Industries for 60 days

(X1-X)2 (X2-X)2 (X3-X)2 (X4-X)2 (X5-X)2

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

 443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

443.9449 1270422 436735.9 287478.3 5304361.7

25748.8 73684478 25330684 16673740 307652981

Sum of the Squares = 25748.8+ 73684478 + 25330684+ 16673740+ 307652981

= 423367632

Mean sum of square = 423367632

5 1 (because there are 5 banks and the degree of freedom is 5-1=4)

=423367632 = 105841908

4
. VARIANCE WITHIN THE SAMPLES

ACC Ambuja Birla JK Ultratech

(X1) (X1-X)2 (X2) (X2-X)2 (X3) (X3-X)2 (X4) (X4-X)2 (X5) (X5-X)2

1473.8 10453 244.9 465.696 742.6 2805.82 934.8 14515.43 4058.9 164259.17

1468.1 9320 242.45 365.957 748.35 3448.04 928.4 13014.25 4081 182662.21

1489.75 13969 243.35 401.201 750.35 3686.92 927.8 12877.71 4111.15 209342.85

1470.2 9729.8 238.75 238.085 749.9 3632.47 938.6 15445.52 4081.25 182662.21

1446.05 5548.8 237.55 202.493 748.35 3448.04 943.55 16700.39 4026.75 139233.46

1418.95 2245.8 236.65 177.689 739.75 2512.01 934.95 14551.6 3984.75 109653.7

1423.35 2454.3 234 114.062 706.2 274.565 909.6 9078.278 3988.45 112117.83

1417.2 2083 230.65 53.7289 704.55 222.606 898.9 7153.776 3999.35 119536.15

1396.8 637.06 228.35 25.3009 700.55 119.246 900.8 7478.79 3987.3 111349.02

1396.45 619.51 227.6 18.3184 697.8 66.7489 899.55 7255.632 3951.25 88589.57

1400.75 852.06 229.9 43.2964 693.7 16.5649 888.6 5517.518 3974.25 102810.01

1386.4 220.23 232.65 87.0489 699.25 92.5444 882.25 4614.485 3970.25 100260.89

1413.05 1721.4 233 93.7024 699.45 96.4324 887.55 5362.633 4007.8 197304.76

1408.7 1379.4 237.15 191.269 703.4 189.613 885.75 5102.245 3999.8 190261.72

1411.5 1595.2 234.2 118.374 704.3 215.209 899.45 7247.117 4039.8 226756.92

1422 2544.2 234.1 116.208 699.7 101.405 891.85 6010.901 4065.55 169694.56

1420.4 2385.3 235.4 145.926 704.75 228.614 898.45 7077.857 4017.45 205970.75

1415.4 1930.7 233 93.7024 704.9 233.173 898.7 7119.984 3998.95 119259.72

1400 808.83 233.7 32.8329 703.6 195.161 899.6 7272.678 3852.45 39537.346

1401.95 923.55 229.05 32.8329 693.7 16.5649 884.7 4953.344 3822.85 28642.178

1397.95 696.43 227.15 14.6689 676.8 164.609 860.15 2100.389 3803.6 57595.2
1387.35 249.32 225.25 3.7249 695.05 29.3764 856.05 2790136 3786.9 17766.224

1393.45 479.17 224.8 2.1904 690.55 0.8464 861.45 2221.237 3824.1 29066.84

1393.7 490.18 225.4 4.3264 693.5 14.9769 863.4 2408.846 3801.75 21945.46

1407.85 1317 228.6 27.8784 699.4 14.9769 869.8 3078.03 3817.8 26958.356

1408.95 1398 228.85 30.5809 693.3 13.4689 865.1 2578.608 3731.1 6004.7001

1411.6 1603.2 229.35 36.3609 696.75 50.6944 868.05 2886.913 3774.55 14626.484

1417.5 2110.5 229.9 42.7716 703.6 195.161 875.85 3785.941 3737.2 6987.2881

1438.1 4427.6 232 74.6496 701.7 145.685 886 5138.022 3786.1 17553.6

1447.6 5782.1 233.15 95.8441 697.85 67.5684 889.45 5644.517 3777.8 15423.156

1467.45 9194.9 238.95 243.048 692.8 10.0489 879.15 4202.929 3769.35 13395.748

1460.65 7937 239.4 257.282 711.1 460.961 884.8 4967.43 3756.65 10617.242

1465.7 8862.3 238.2 220.226 710.35 429.318 891.55 5964.473 3718.5 4210.7121

1455.85 7104.8 235.65 151.044 702.95 177.422 899.45 7247.117 3714.25 3677.2096

1442.9 5089.4 235.05 136.656 706.55 286.286 860.7 2151.104 3678.15 602.2116

1465.55 8834.1 237.8 208.514 710 414.937 846.9 1061.456 3705.65 602.2116

1487.55 13454 239.2 250.906 716.15 703.31 824.05 94.6729 3767.7 13016.528

1486.95 13315 237.55 201.356 721.55 1018.89 841.45 736.0369 3761.9 11726.724

1485.5 12982 238.4 226.202 737.65 2305.92 850.05 1276.633 3752.45 9769.3456

1497.1 15760 238.65 233.784 725.6 1293.84 834.85 421.4809 3717.9 4133.2041

1456.2 7163.9 234.85 132.02 744.5 3010.72 840.45 682.7769 3696 1796.9121

1480.15 11792 239.6 263.738 749 3524.8 838.65 591.9489 3754.85 10249.538

1423.9 2739.5 229.25 34.6921 754.45 4201.63 788.2 682.2544 3737.5 7037.5321

1431.85 3634.9 231.6 67.8976 748 3407.06 801.25 170.8249 3721.55 4615.8436

1468.55 9407.1 234.4 121.882 746.3 3211.49 754.7 3554.544 3779.75 15911.3

1413.5 1759 229.05 32.3761 738.3 2368.77 768.9 2062.976 3694.45 1667.9056
1428.4 3230.8 229.45 37.5769 737 2243.92 740.1 5508.608 3693.3 1575.2961

1430.65 3491.6 232.8 89.1136 742.9 2837.69 722.9 8357.616 3680.4 717.7041

1399.4 775.07 229.15 33.5241 725.9 1315.51 737.85 5847.661 3656.85 10.4976

1358.6 167.96 223.4 0.0016 720 922.337 735.7 6181.104 3527.8 15828.156

1334.7 1358.7 220.1 10.6276 719.1 868.481 716.9 9490.656 3471.65 33109.442

1326.45 2034.9 217.7 32.0356 706.05 269.616 730.3 7059.36 3501.65 23091.842

1361.05 110.46 220.35 9.0601 702.1 155.501 719.8 8934.03 3380.25 895603782

1349.7 477.86 217.55 33.7561 700.25 112.784 709.55 10976.75 3340.2 98225.828

1328.9 1819.9 212.9 109.412 695.35 32.7184 708.85 11187.29 3319.7 111495.89

1331 1645.1 212.5 117.94 695.15 30.4704 717.35 9403.181 3352.5 90667.232

1329.5 1769 213.25 102.212 694.1 184.145 703.2 12347.65 3352.5 90667.232

1341.6 897.6 214.25 82.9921 681.55 65.2864 682.6 17350.16 3353.1 90306.26

246783 6790.59 58163 3146841 899286340

Total sum of squares with in the Industries = 246783+ 6790.59 + 58163+ 3146841+
899286340

= 902744917.6

Mean sum of squares within the industries = 902744917.6

300 5

= 902744917.6

295

= 3060152.263

When we add the sum of squares between industries and sum of squares within industries, we get
the sum total, i.e 105841908 + 3060152.263 = 108902060.3
Source of Variation Sum of Squares Degrees of freedom Mean Square

Between Industries 423367632 4 105841908

Within Industries 902744917.6 295 3060152.263

TOTAL 1326112550 299

F = Variance between samples

Variance within samples

= 105841908

3060152.26

= 34.587

The table value for F for V1= 4 and V2 = 295 at 5% level of significance = 2.402. The calculated
value of F is greater than the table value and hence the difference in the mean values of the
sample is significant. i.e. the sample could not have come from the same universe.