2. You don't run ANOVA to find out their average return rates. You just calculate them. You run an ANOVA test to find out whether their returns are about the same (the null hypothesis), or one or more differ from the rest at your chosen significance level.
3. You could run a t-test (paired by year) if you had two funds (or two kinds of funds), but you have three.
4. You could run a chi-square test of independence if you had two categorical variables, but you only have one (small/mid/large). If you were comparing six funds, a passive index fund and an actively managed one in each of the three capitalization styles, a chi-square test might tell you whether the two categorizations (active/passive and small/mid/large) are statistically independent.
5. You aren't saying what kind of returns you are using. From an individual investor's point of view, you should compare net returns, obtained by subtracting each fund's expense ratio (ER) from its gross returns.
6. @Jerry: Most "analysis" available to an individual investor in popular-market books and on the Internet is a lot of talk and very little science. A statistical analysis like this, however simple, attempts to apply an objective and verifiable scientific method to the chaos, and should be commended.
Well I took the 3 funds small growth, mid-cap, and large growth and did an anova analysis to find which offered the best rate of return.
Now I am trying to find the top performing mid cap fund to compare my avg. rate of return to the top performing fund.
Then I will be lost as to how to use the 3rd test.
I some how have to use stats to analyze these...
I think you are a bit off track.
As an investor, you compare returns to a benchmark (ex: S&P 500 for large cap US stocks). Your goal is the most excess return for the least amount of risk.
Research ratios like IR, Jensen, Treynor to get an idea how professional investors use statistics to examine risk and return.
AAII (American Association of Individual Investors) does some decent research on risk-adjusted returns.
Morningstar is another good source for mutual fund analysis.
Well I have to conduct a project where I compare 3 mutual funds, small growth, mid-cap, and large growth. I am trying to figure out which investment funds would be the best for planning for retirement. This project is expected to use statistics to help me arrive at my conclusion. I am having such a hard time grasping this.
I am planning to use the anova analysis, a chi square test and a t test. If better tests can be used please enlighten me.
Could someone please explain to me, what each of these would mean for my data, and how I can arrive at my conclusion.
I think I have an idea, its just so confusing. I not only want to do a good job for a great grade on this project, but I am also hoping to find out if I am making the right financial choices and take something from this.
Any help would be greatly appreciated.
