Quantitative Methods I

[QM 105]
Class-I:
Course rules and framework
Course Overview
Case: Price of flats in Bangalore
Data Summarization and Presentation

What is Statistics and who are called

statisticians?
Three men are in a hot-air balloon. Soon, they find themselves lost in
a canyon somewhere. One of the three men says, "I've got an idea. We
can call for help in this canyon and the echo will carry our voices far."
So he leans over the basket and yells out, "Helllloooooo! Where are
we?" (They hear the echo several times.)

Fifteen minutes pass. Then they hear this echoing voice:

"Helllloooooo! You're lost!!"
One of the men says, "That must have been a statistician." Puzzled,
one of the other men asks, "Why do you say that?"
The reply: "For three reasons.
he took a long time to answer,
he was absolutely correct, and
his answer was absolutely useless."

Rules and General Guidelines

Outline of todays class

Course Information
General introduction
What is statistics?
Introductory examples /problems
Application to other management disciplines

Case: Price of flats in Bangalore

Data presentation and summarization methods
Measures of Central tendency and Dispersion
Standard Deviation --- Chebychevs inequality
Box plot

Attendance
Punctuality
code of conduct
Come prepared with the case(s) assigned in the session
Bring calculator, text book to class everyday
Question-answers, discussions and CP
Difficulty level and frame of mind
Course objective: different aspects of learning and relative
importance

Concepts
Reading material
Problem solving
Use of software

How to use

Text-book

Question bank

Exercise 1

General Information

Office Location: C 2nd Floor

Phone(ext) 3150
E-mail
shubho@iimb.ernet.in
Tutors:

Akshay Kumar Singh, (FPM)

PGP2 tutors
Ashwin Balendudhara : C Block 2nd floor
Link:

Section C
Section D
Section D

Where will you use Statistics?

Akanksha Trigun
Richa Srivastava
Siddharth Sharma

https://docs.google.com/spreadsheets/d/1OVg1QzU95Xyxtl5sZtl7pS9KMNfubAwOsZYCMwZw0zA/edit#gid=0

Moodle will be used for providing/collecting

All lecture presentations (?), additional material
Announcement
Question-banks
(Computer) Assignment
Register yourself at moodle http://moodle.iimb.ernet.in/
Quantitative methods 1 2014 Sections C and D
Key required for registering. Do not share course key with anybody else
Do not allow anybody unauthorized use of your account
Upload your picture along with registration
Create discussion group

Finance, Marketing
Operations Management,
Organization Behaviour

Personal Life

Directly
or
as a Supervisor

Statistical application in
Managerial Function

What is STATISTICS?

DATA

Population

probability
Arrangement
Presentation
Summarization

INFERENCE

Some Applications in
Finance and Accounting

Finance & accounting

Operations management
Marketing
Human resource management
Economics
Information systems

Some Applications in
Operations Management

Insurance companies have to estimate how

much it is likely to pay to cover a risk.
Investment mgmt -- relationship between
risk and return
Market model (Regression)

Portfolio diversification
Managerial accounting prepare budget
Forecast sales, cost

Product design -- analyze survey result to determine what

customers want, feasibility study
Facility location in a stochastic world
Inventory management
Queuing (probability/stochastic process)
Project management PERT/CPM (probability
Distribution)
Quality control (statistical testing)

Price of flats in Bangalore

What does the figures convey?
21.32

9.75

32.96

75.27

70.71

108.47

15.60

17.01

16.18

12.40

14.60

14.98

17.21

19.62

30.20

20.23

20.87

20.16

79.36

25.32

23.36

17.98

131.33

54.19

81.92

16.05

102.42

7.46

41.72

55.79

125.85

25.34

17.83

46.53

19.98

49.70

20.94

156.89

18.02

20.28

26.41

27.72

24.72

22.48

65.10

6.72

11.36

8.53

13.76

13.44

86.32

9.73

16.07

49.70

39.38

54.58

43.66

9.04

11.10

47.23

35.09

12.78

22.35

30.12

42.36

30.29

13.08

122.47

40.03

15.04

28.72

52.66

54.03

16.29

12.95

65.95

10.37

7.79

47.89

45.18

158.30

86.05

76.94

29.67

27.15

38.97

26.56

11.66

6.55

52.59

38.68

44.44

32.16

11.92

73.00

21.13

13.84

14.05

19.23

17.83

53.49

40.87

16.66

77.01

6.62

42.11

24.70

28.03

16.06

17.46

53.48

51.54

39.06

47.13

99.93

34.57

43.43

119.37

20.72

62.21

30.41

67.54

24.07

14.52

64.12

17.02

41.55

41.95

21.04

19.05

9.09

133.53

17.23

29.04

22.47

161.98

73.81

54.85

78.70

31.50

41.82

22.20

10.20

74.69

21.51

9.53

49.96

50.77

37.45

16.14

48.35

41.27

64.07

2.95

39.29

87.68

6.83

28.11

80.09

104.64

32.81

30.44

119.53

26.20

16.03

56.03

26.89

62.26

38.38

86.72

24.60

12.56

7.91

3.48

29.44

34.44

26.72

33.33

88.31

29.02

11.09

8.91

31.60

58.02

8.10

16.64

41.21

22.79

20.59

23.78

19.07

14.26

45.41

28.41

74.49

33.43

28.38

18.86

38.18

31.82

Diagrammatic Representation of Data

Forming Class-Intervals

How many intervals?

Equal or unequal width?
Gaps?
Open or close ended?

Bar diagram (of various kinds)

Pie diagram
Frequency Polygon
Data Types (different scale)
Ratio scale
Histogram
Interval scale
Ogive
Ordinal data
Nominal data
Stem and leaf
Box-plot

Sturges' Formula for no. of class intervals

1 + 3.3log(n)

Pie Chart

Exercise 1: Table 1.18 (Bar diagram)

Arrests in 2012 under Gambling Act and Psychotropic Substances Act in Union
terriitories

Average Incidence Rate: State vs UT

70

LAKSHADWEEP, 0, 0%
PUDUCHERRY, 31, 3%

A & N ISLANDS, 66, 7%

60
CHANDIGARH, 330, 34%

50

40
States
UT

30

20

10

DELHI, 518, 54%

D & N HAVELI, 14, 1%

DAMAN & DIU, 8, 1%

Arms Act

Narcotic Drugs
and Psychotropic
Substances Act

Gambling Act and

Psychotropic
Substances Act

Excise Act

Prohibition And
Explosive Act

Explosives
Substances Act

Immoral Traffic
(Prevention) Act

Features of good diagrammatic

representation of data

Frequency Polygon and Ogive

Relative Frequency Polygon
0.3

Ogive

1.0

0.2
0.5
0.1

0.0

Must be self-explanatory
Clear labels stating variables
Drawn to scale --- indicate unit
Simple and pleasant to look at and useful

0.0
0

10

20

Sales

30

40

50

10

20

30

40

50

Sales

Join the points (class-mark, rel. freq.) to form a polygon;

Can plot frequency or relative frequency density as well.

Summarization

Measures of Central tendency

Objective
MEAN, MEDIAN and MODE
Computation from grouped or ungrouped
data
Relative advantages and disadvantages
(effect of outliers)
Other measures liked truncated or
winsorized mean

Rest (skewness, kurtursis etc)

Frequency distribution
Central Tendency

Dispersion

Computation of mean/median/mode
from grouped data
Mean use class mark
n +1
F
Median (m)=Lm + 2
wm , where Lm , f m , wm are the lower boundary,
fm
frequency and width of the class containing the median. F denotes the sum
of the frequencies of all the classes prior to the median.

Mode (M )=LM +

d1
wM , where d1 = f M f 1 , d 2 = f M f1
d1 + d 2

Measures of Dispersion

Concept and objective

Range, inter-quartile range (IQR =Q3 Q1)
Variance and standard deviation (sd)
Computation
Relative dispersion -- the coefficient of
variation

C.V. =

100%