Financial Applications of ANOVA¶

Overview¶

ANOVA has several applications in quantitative finance.

Applications¶

Comparing portfolio returns across different strategies
Sector analysis: testing whether mean returns differ across sectors
Factor model testing: testing significance of factors
Trading strategy evaluation: comparing performance across market regimes

Example: Comparing Fund Returns¶

Use one-way ANOVA to test whether the mean returns of three investment funds are equal, followed by Tukey HSD to determine which pairs differ significantly.