Analysis of Variance: Quantitative Techniques Indian Institute of Management Indore

Quantitative Methods by SM
Sunday, October 12, 2014

Analysis of Variance

Sujay Mukhoti
Thanks to Arun Kumar, Ravindra Gokhale, and Nagarajan Krishnamurthy
Quantitative Techniques

Indian Institute of Management Indore
ANOVA
The purpose of ANOVA is to test to see if there is any difference
between group means on some variable

ANOVA is designed to detect differences among means from
populations subject to different treatments

ANOVA is a joint test :The equality of several population
means is tested simultaneously or jointly.

ANOVA tests for the equality of several population means by
looking at two estimators of the population variance (hence,
analysis of variance).
ANOVA: Data
Three samples : yield corresponding to three different treatments

Samples are drawn on same variable: independent samples

Means: (
) : (
)
SD: (
) : (
)

ANOVA: Terminology
We may refer to any categorical variable as a factor.
Fertilizer effect
Each factor has a certain number of levels.
A, B,C
A treatment is a specific experimental condition (determined by
factors and their levels).
A, B, C
The experimental unit (Basic Unit of Study) is the smallest unit
to which a treatment can be assigned.
Plots of land where the treatments are applied

Experimental factors are assigned to the experimental units
without any preference
ANOVA: Data
Sample size: n= 4+4+3=11

If the population means are equal, we expect the variance among
the sample means to be small.
These sample variances can be used to find a pooled estimator of
the population variance.

ANOVA: Assumptions
We assume independent random sampling from each of the
populations

We assume that the variable under study are normally distributed

with means
that may or may not be equal,

but with equal variances,
2
.

Moto-Tech Manufacturing Company
Moto-tech produces wafers (thin slice of semiconductor
material) that is required for the fabrication of chips.
Company wants to improve the quality of wafers produced.
There are three potential factors that may affect the quality of
wafers: temperature, time, and supplier of the raw material.
Engineers were, however, convinced that time does not have any
effect on the quality of wafers.
To test whether, supplier and temperature has any effect, they
collected data.
Engineering Question
What is the engineering question?

Average length of wafers for different temperature
level is the same or not.
Statistical Problem
0 1
Null Hypothesis
H : = = (1)
Alternative Hypothesis
H : At least one is different from all the other 's. (2)
h m
A

When H
0
is false:
x x x

What if each pair is tested?

0

0

0

0

= 0.1
Level may increase!!
ANOVA : Deviations
I II III
Y
11
Y
21
Y
31

Y
1n1
Y
2n2
Y
3n3

3

Grand Mean

n=n
1
+n
2
+n
3

Error deviation:

Treatment deviation:
= +

Under H
0
, t
i
s are small

= 0 : not useful for testing!!

ANOVA : Squared Deviations
Total sum of square: SST =
2

Sum of square due to Treatment: SSTr =
2
=
2

Sum of square due to Error: SSE =
2

=
2

SST = SSTr + SSE : Total deviation=systematic +error

Treatment df = # groups -1; Error df = n - #groups

Total df = n- 1 : # observation restriction for grand mean
ANOVA : Squared Deviations
Mean square total: MST =
1

Mean square due to Treatment: MSTr = =
1

Mean square due to Error: MSE =

E[MSTr] =
2
+
2
1
; E[MSE] =
2

F= MSTr/MSE;

Under H
0
, E[MSTr] = E[MSE] ; Right tail test
ANOVA Output for the Moto-tech Data
ANOVA
Angstroms
Sources of
Variation
Sum of Squares df Mean Square F Sig.
Between Groups SSTr = .718 K-1=2 MSTr =.359 .022 .978
Within Groups SSE = 2151.076 N-k= 132 MSE= 16.296
Total SST = 2151.794 N-1= 134
F-ratio & F-distribution
F = MSTr/MSE

F follows F
k-1,n-k

Reject H
0
if F
obs
> Critical F at level = 0.95, 0.99 etc.
Conclusion
There is no difference in the mean length of wafers
produced at different temperatures.
Problem
Research has shown that in the fast-paced world of
electronics, the key factor that separates the winners
from the losers is actually how slow a firm is in
making decisions: The most successful firms take
longer to arrive at strategic decisions on product
development, adopting new technologies, or
developing new products. Time taken for such
decision by high, medium and low performing firms
are given in the data file. Is the claim true? Justify at
level = 5%.

Analysis of Variance: Quantitative Techniques Indian Institute of Management Indore

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Quantitative Methods by SM

Sunday, October 12, 2014

that may or may not be equal,

= 0 : not useful for testing!!

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