statistics please help i have no clue how to solve this

Question

The dataset has 425 cases and 12 variables pertaining to past and current customers who have borrowed from a bank for various reasons. The dataset contains customer-related information such as financial standing, reason, for the loan, employment, demographic information, and the outcome or dependent variable for credit standing classifying each case as good or bad, based on the bank’s past experience.
Identify two variables that can be used to perform a one-way analysis of variance (One-way ANOVA

Explain what the One-way ANOVA would test

What kinds of insights could be gained from this analysis?

Answer 1

Hi Rekha.

The primary difference between one-way ANOVA and two-way ANOVA lies in the number of independent variables (factors) they analyze. A one-way ANOVA uses one independent variable, while a two-way ANOVA uses two. This means a two-way ANOVA can examine not only the individual effects of each factor but also their potential interaction on the dependent variable. 

From description of problems it is evident that sample size (425) is large and number of variables (12) are many. Therefore, two-way ANOVA analysis should be preferred over one-way ANOVA. However, you wish to know which two variables should be considered for One-way ANOVA analysis. My response is Financial Standing and Reasons for the Loan are of prime importance.

Let us say you wish to use One-way ANOVA to determine validation of credit (Yes or No) dependent variable. Then, one way ANOVA will analyze sensitivity of Financial Standing data of 425 cases and determine top eligible clients for funding approval first time. You can use the same analysis tool second time using data of Reasons for the loan by comparing ranking of causes among 425 cases. Then, ANOVA will provide graphs of relative merits of funding the clients in order of their importance. However, one-way ANOVA analysis provides incomplete picture because it does not take into account interdependencies of first and second prime factor on output variable. Therefore, two-way ANOVA analysis is imperative for this problem to get more meaningful results. Please check out You Tube

at One-way vs. Two-way ANOVA.

I hope this helps.

Sincerely,

Shailesh (Sky) Kadakia, Expert Tutor with WYZANT