Thursday, 1 September 2011

Wilks' lambda

Wilks' lambda is a test statistic used in multivariate analysis of variance (MANOVA) to test whether there are differences between the means of identified groups of subjects on a combination of dependent variables. Thus, they are considering eight dependent variables and comparing the mean of this combination for two groups. Wilks' lambda performs, in the multivariate setting, with a combination of dependent variables, the same role as the F-test performs in one-way analysis of variance. Wilks' lambda is a direct measure of the proportion of variance in the combination of dependent variables that is unaccounted for by the independent variable (the grouping variable or factor). If a large proportion of the variance is accounted for by the independent variable then it suggests that there is an effect from the grouping variable and that the groups (in this case the graduates and diplomats) have different mean values. Wilks' lambda statistic can be transformed (mathematically adjusted) to a statistic which has approximately an F distribution. This makes it easier to calculate the P-value.

Author: Prashansa Wankhede

Finance Group 5

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