Basic Business Statistics

11th Edition

Chapter 11

Analysis of Variance

Chap 11-1
 Chapter Overview
Analysis of Variance (ANOVA)

One-Way Randomized Two-Way

ANOVA Block Design ANOVA
F-test
Tukey Multiple Interaction
Tukey- Comparisons Effects
Kramer
Multiple Tukey Multiple
Comparisons Comparisons
Levene Test
For
Homogeneity
of Variance
Chap 11-2
 One-Way Analysis of Variance
 Evaluate the difference among the means of three
or more groups
Examples: Accident rates for 1st, 2nd, and 3rd shift
Expected mileage for five brands of tires

 Assumptions
 Populations are normally distributed

 Populations have equal variances

 Samples are randomly and independently drawn

Chap 11-3
 Hypotheses of One-Way ANOVA


H0 : μ1  μ2  μ3    μc
 All population means are equal
 i.e., no factor effect (no variation in means among
groups)

H1 : Not all of the population means are the same
 At least one population mean is different
 i.e., there is a factor effect
 Does not mean that all population means are
different (some pairs may be the same)

Chap 11-4
 One-Way ANOVA
H0 : μ1  μ2  μ3    μc
H1 : Not all μ j are the same
The Null Hypothesis is True
All Means are the same:
(No Factor Effect)

μ1  μ 2  μ 3
Chap 11-5
 One-Way ANOVA
(continued)
H0 : μ1  μ2  μ3    μc
H1 : Not all μ j are the same
The Null Hypothesis is NOT true
At least one of the means is different
(Factor Effect is present)

or

μ1  μ2  μ3 μ1  μ2  μ3
Chap 11-6
 One-Way ANOVA
 Suppose a package delivery company purchased 14
trucks at the same time. Five trucks were purchased
from Ford, four from General Motors (GM), and five
from Daimler Chrysler. All the trucks were used to
deliver packages. The cost of maintaining the trucks
for the first year is shown. Is there a significant
difference in the mean maintenance cost of the three
manufacturers?
One-Way ANOVA
Maintenance Cost, By
Manufacturer
Ford Daimler GM
Chrysler
$ 914 $933 $1,004

1,000 874 1,114

1,127 927 1,044

988 983 1,100

947 1,139
 One-Way ANOVA
 The three different manufacturers are called
treatments.
 Treatments. A specific source of variation in a set of
data.
 The term is borrowed from agricultural research,
where much of the early development of the ANOVA
technique took place. Crop yields were compared after
different fertilizers (that is, treatments) had been
applied to various plots of land.
 One-Way ANOVA
 k (or C) = 3
 n = 14
 0.05 significance level
 In the study comparing truck manufacturers there are three
treatments. Therefore there are two degrees of freedom in
the numerator, found by (k  1) = (3  1) = 2. How is the
number of degrees of freedom for the denominator
determined? Note that in the three samples there are a
total of 14 observations. Thus the total number of
observations, designated by n, is 14. The number of
degrees of freedom in the denominator is 11, found by
(n  k) = (14  3) = 11
 One-Way ANOVA
 The critical value of F can be found in F table. There
are tables for both the 0.01 and the 0.05 significance
levels. Using the 0.05 significance level, the degrees
of freedom for the numerator are at the top of the table
and for the denominator in the left margin. To locate
the critical value, move horizontally at the top of the
table to 2 degrees of freedom in the numerator, then
down that column to the number opposite 11 degrees
of freedom in the left margin (denominator). That
number is 3.98, which is the critical value of F.
 One-Way ANOVA
 The decision rule is to reject the null hypothesis if the
computed value of F exceeds 3.98; otherwise it is not
rejected. To reject the null hypothesis and accept the
alternate hypothesis allows us to conclude that there is
a significant difference between at least one pair of
means. If the null hypothesis is not rejected, this
implies the differences between the sample means
could have occurred by chance. Portrayed graphically,
the decision rule is shown.
One-Way ANOVA
 Partitioning the Variation

 Total variation can be split into two parts:

SST = SSA + SSW

SST = Total Sum of Squares

(Total variation)
SSA = Sum of Squares Among Groups
(Among-group variation)
SSW = Sum of Squares Within Groups
(Within-group variation)

Chap 11-14
 Partitioning the Variation
(continued)

SST = SSA + SSW

Total Variation = the aggregate variation of the individual

data values across the various factor levels (SST)

Among-Group Variation = variation among the factor

sample means (SSA)

Within-Group Variation = variation that exists among

the data values within a particular factor level (SSW)

Chap 11-15
 Partition of Total Variation
Total Variation (SST)

Variation Due to Variation Due to Random

= Factor (SSA) + Error (SSW)

Chap 11-16
 Total Sum of Squares
SST = SSA + SSW
c nj

SST   ( Xij  X) 2

j1 i1
Where:
SST = Total sum of squares
c = number of groups or levels
nj = number of observations in group j
Xij = ith observation from group j
X = grand mean (mean of all data values)

Chap 11-17
 Total Variation
(continued)

2 2 2
SST  ( X 11  X )  ( X 12  X )      ( X cn  X )
c

R esponse, X

G roup 1 G roup 2 G roup 3

Chap 11-18
 Among-Group Variation
SST = SSA + SSW
c
SSA   n j ( X j  X)2
j1
Where:
SSA = Sum of squares among groups
c = number of groups
nj = sample size from group j
Xj = sample mean from group j
X = grand mean (mean of all data values)

Chap 11-19
 Among-Group Variation
(continued)
c
SSA   n j ( X j  X)2
j1

SSA
Variation Due to
Differences Among Groups MSA 
c 1
Mean Square Among =
SSA/degrees of freedom

i j

Chap 11-20
 Among-Group Variation
(continued)

SSA  n 1 (X1  X)  n 2 (X 2  X)      n c (X c  X)
2 2 2

R esponse, X

X3
X2 X
X1

G roup 1 G roup 2 G roup 3

Chap 11-21
 Within-Group Variation
SST = SSA + SSW
c nj

SSW    ( Xij  X j ) 2

j1 i1
Where:
SSW = Sum of squares within groups
c = number of groups
nj = sample size from group j
Xj = sample mean from group j
Xij = ith observation in group j
Chap 11-22
 Within-Group Variation
(continued)

c nj

SSW    ( Xij  X j )2
j1 i1
SSW
Summing the variation
MSW 
within each group and then
adding over all groups nc
Mean Square Within =
SSW/degrees of freedom

μj
Chap 11-23
 Within-Group Variation
(continued)

SSW  (X11  X1 )  (X12  X 2 )      (X cn c  X c )

2 2 2

R esponse, X

X3
X2
X1

G roup 1 G roup 2 G roup 3

Chap 11-24
 Obtaining the Mean Squares
The Mean Squares are obtained by dividing the various
sum of squares by their associated degrees of freedom

SSA Mean Square Among

MSA  (d.f. = c-1)
c 1
SSW Mean Square Within
MSW 
nc (d.f. = n-c)

SST
MST  Mean Square Total
n 1 (d.f. = n-1)
Chap 11-25
 One-Way ANOVA Table

Source of Degrees of Sum Of Mean Square F

Variation Freedom Squares (Variance)

Among SSA FSTAT =

c-1 SSA MSA =
Groups c-1
MSA
Within SSW
n-c SSW MSW = MSW
Groups n-c
Total n–1 SST

c = number of groups
n = sum of the sample sizes from all groups
df = degrees of freedom

Chap 11-26
 One-Way ANOVA
F Test Statistic
H0: μ1= μ2 = … = μc
H1: At least two population means are different
 Test statistic MSA
FSTAT 
MSW
MSA is mean squares among groups
MSW is mean squares within groups
 Degrees of freedom
 df1 = c – 1 (c = number of groups)
 df2 = n – c (n = sum of sample sizes from all populations)

Chap 11-27
 Interpreting One-Way ANOVA
F Statistic
 The F statistic is the ratio of the among
estimate of variance and the within estimate
of variance
 The ratio must always be positive
 df1 = c -1 will typically be small
 df2 = n - c will typically be large

Decision Rule:
 Reject H if F 
0 STAT > Fα,
otherwise do not reject
0
H0 Do not
reject H0
Reject H0

Fα
Chap 11-28
 One-Way ANOVA
F Test Example

You want to see if three Club 1 Club 2 Club 3

different golf clubs yield 254 234 200
different distances. You 263 218 222
randomly select five 241 235 197
measurements from trials on 237 227 206
an automated driving 251 216 204
machine for each club. At the
0.05 significance level, is
there a difference in mean
distance?

Chap 11-29
 One-Way ANOVA Example:
Scatter Plot
Distance
Club 1 Club 2 Club 3 270
254 234 200 260 •
•
263
241
218
235
222
197
250 • X1
240 •
237 227 206 230
• ••
251 216 204
220 •
X2 • X
••
210
200 •• X3
••
190

1 2 3
Club Chap 11-30
 One-Way ANOVA Example:
Scatter Plot
Distance
Club 1 Club 2 Club 3 270
254 234 200 260 •
•
263
241
218
235
222
197
250 • X1
240 •
237 227 206 230
• ••
251 216 204
220 •
X2 • X
••
210
x1  249.2 x 2  226.0 x 3  205.8 200 •• X3
••
190
x  227.0

1 2 3
Club Chap 11-31
 One-Way ANOVA Example
Computations
Club 1 Club 2 Club 3 X1 = n1 =
254 234 200 X2 = n2 =
263 218 222
241 235 197 X3 = n3 =
237 227 206 n=
251 216 204 X=
c=
SSA =
SSW =

F STAT = ❑ =¿
MSA =
MSW = ❑
Chap 11-32
 One-Way ANOVA Example
Computations
Club 1 Club 2 Club 3 X1 = 249.2 n1 = 5
254 234 200 X2 = 226.0 n2 = 5
263 218 222
241 235 197 X3 = 205.8 n3 = 5
237 227 206 n = 15
251 216 204 X = 227.0
c=3
SSA = 5 (249.2 – 227)2 + 5 (226 – 227)2 + 5 (205.8 – 227)2 = 4716.4
SSW = (254 – 249.2)2 + (263 – 249.2)2 +…+ (204 – 205.8)2 = 1119.6

MSA = 4716.4 / (3-1) = 2358.2 2358.2

FSTAT   25.275
MSW = 1119.6 / (15-3) = 93.3 93.3

Chap 11-33
 One-Way ANOVA Example
Solution
H 0: μ 1 = μ 2 = μ 3 Test Statistic:
H1: μj not all equal
MSA 2358.2
 = 0.05 FSTAT    25.275
MSW 93.3
df1= 2 df2 = 12

Critical Decision:
Value:
Reject H0 at  = 0.05
Fα = 3.89
Conclusion:
 = .05
There is evidence that
0 Do not Reject H
0
at least one μj differs
reject H0
FSTAT = 25.275 from the rest
Fα = 3.89
Chap 11-34
One-Way ANOVA
Excel Output

Chap 11-35
 One-Way ANOVA
Excel Output
SUMMARY
Groups Count Sum Average Variance
Club 1 5 1246 249.2 108.2
Club 2 5 1130 226 77.5
Club 3 5 1029 205.8 94.2
ANOVA
Source of
SS df MS F P-value F crit
Variation
Between
4716.4 2 2358.2 25.275 4.99E-05 3.89
Groups
Within
1119.6 12 93.3
Groups
Total 5836.0 14

Chap 11-36
One-Way ANOVA – SPSS

Enter the Data

Column 1 – Distances
Column 2 - Club 1,2 & 3
One-Way ANOVA – SPSS
One-Way ANOVA – SPSS

1. Analyse
2. Compare Means
3.One Way ANOVA
One-Way ANOVA – SPSS

1. Distance as ‘Dependent’

2. Club as ‘Factor’
3. Ok
One-Way ANOVA – SPSS
 One-Way ANOVA
Assignment Problem
 Ex. The Training Director of a company is trying to
evaluate three different methods of training new
employees. After the experimentation of 3 methods, he
chooses 16 new employees assigned at random to the
three training methods & record their daily production after
they complete the programme.
Method 1 15 18 19 22 11
Method 2 22 27 18 21 17
Method 3 18 24 19 16 22
 The Director wonders whether there are differences in
effectiveness among the three methods. (α = 0.05)
 Ho: µ1 = µ2 = µ3 --- Null Hypothesis
 H1: µ1, µ2, µ3 are not equal