AIUB

Master of Business Administration

Course Instructor: Dr Swapan Kumar Dhar

Measures of Dispersion or Variability

Variability may be defined as the extent to which the data values differ from each other.
Different Measures of Dispersion:
There are many measures of dispersion. But here we are considering only 4 of them. They are:
(i)
Range
(ii)
Variance
(iii)
Standard deviation
(iv)
Coefficient of variation
Range
For simple distribution, Range = Highest value Lowest value
For grouped frequency distribution,
Range = Upper limit of the highest class Lower limit of the lowest class.
Alternatively,
Range = Upper boundary of the highest class Lower boundary of the lowest class.
The range measures the total spread in the data set.
Example: The capacities of several plastic containers are 30, 20, 37, 64 and 27 liters respectively.
What is the range?
Solution: Arranging in ascending order, we get 20, 27, 37, 38, and 64.
Range = 64 20 = 44 liters.
Example: Suppose a sample of 40 hourly wages was grouped into this frequency distribution:
Hourly earnings (in $)
5 up to 10
10 up to 15
15 up to 20

Number
10
21
9

Find the range.

Solution: Range = $ 20 - $ 5 = $ 15.
Example: Following represents the current years Return on Equity of the 25 companies in an
investors portfolio.
-8.1
-5.1
-3.1
-1.4
1.2

3.2
4.1
4.6
4.8
5.7

5.9
6.3
7.9
7.9
8.0

8.1
9.2
9.5
9.7
10.3

12.3
13.3
14.0
15.0
22.1

Solution:
Here Highest value = 22.1 and lowest value = -8.1.
So Range = 22.1 (-8.1) = 30.2
Variance and Standard Deviation:
Variance is the arithmetic mean of the squared deviations from the mean. Standard deviation (S.D) is
the positive square root of the variance.
Population Variance
For ungrouped data, the population variance denoted by 2 (sigma square) is

(X )

N
Where, X The value of an observation in the population

The arithmetic mean of the population

N
N The total number of observations in the population.
Working formula for population variance is 2

X
N

X
N

Example: The ages of all patients in the cancer ward of DMC Hospital are 38, 26, 13, 41 and 22
years. What is the population variance?
Solution:
(38) (26) (13) (41) (22)
2

38 26 ... 22 106.8 Years.

5
Population Standard Deviation
For ungrouped data

(X )

For the previous problem,

106.8 10.33 Years.

Sample Variance
For ungrouped data, the formula for the sample variance is S 2

Where, X

(X X)

n 1

The value of the observations in the sample

X
X
The mean of the sample
n
n Total number of observations in the sample.

Working formula

S
2

X
2

X)

n 1
Example: The hourly wages for a sample of part-time employees of certain firm are: $2, $10, $6, $8
and $9. What is the sample variance?
Solution: Using the working formula, we have

S
2

X)

n 1

Hourly wage (X)

2
10
6
8
9
$35
285

(35)

5
5 1
Population Variance:

S.D

fX

40 $10
4

f(X )

fX

4
100
36
64
81
285

(a) For grouped data,

X2

S.D

fX

fX

fX

,Where X Mid value.

,N f

fX
N

fX

(b) For grouped frequency distribution,

fX

Sample Variance
(a) For simple frequency distribution
S
2

f(X X)

n 1

fX

fX )

n 1

(b)Grouped frequency distribution

S

f(X X)

n 1

fX
2

fX)

Where X

Mid value of a class.

n 1

Example: Find the standard deviation from the following data:

Daily wages ($)
Number of workers

20-24
16

25-29
28

30-34
14

35-39
12

Solution: Calculation.
Mid value( x )
22
27
32
37

Frequency ( f )
16
28
14
12
N=70

Class interval
20-24
25-29
30-34
35-39
Total

fX
Variance

fX

58920

fx
352
756
448
444
2000

fx 2
7744
20412
14336
16428
58920

2000 $25,388 . S.D. 5.04 .

70

N
70
N
Example: Marks obtained by all 100 students in a class in an examination are as follows:
Marks
Below 10
Below 20
Below 30
Below 40
Below 50
Below 60
Below 70

Number of students
14
30
50
75
87
95
100

Find the mean, variance and S.D.

Solution: Calculation
Number of students ( f )
Marks
0-10
14
10-20
16
20-30
20
30-40
25
40-50
12
50-60
8
60-70
5
Total
N=100

fX
Variance
N

fX
N

S.D. 16.52 Where Mean

Mid value( x )
5
15
25
35
45
55
65

2990

100
100
116700

fx
70
240
500
875
540
440
325
2990

fx 29.90 .
N

1167 894.01 272.99 .

fx 2
350
3600
12500
30625
24300
24200
21125
116700

Example: The head of a personnel department of a large business maintains records of yearly casual
leaves taken by employees. The following data show the records.
Number of Casual Leave Days
Below 02
Below 04
Below 06
Below 08
Below 10

Number of Employees
11
24
49
63
72

Find the mean, variance, S.D. and range of the number of casual leaves taken by the employees.
Example: A dividend is a payment from a publicly traded company to its shareholders. The dividend
yield of a stock is determined by dividing the annual dividend of a stock by its price. The following data
represent the dividend yields (in percent) of a random sample of 32 publicly traded stocks of
companies with a value of at least $ 5 billion.
1.7
0.89
1.35

0.15
0.41
0

1.15
0
0

0.62
2.59
0.24

1.06
0.17
0

2.45
0.64
0

2.38
0.67

2.83
2.07

2.16
0.94

1.05
2.04

1.22
0

1.68
1.35

0.21
0.12

(a) How many classes would you recommend forming a frequency distribution?
(b) What class interval would be easier to work with?
(c) Form the frequency distribution on the basis of (a) and (b).
(d) Draw an appropriate diagram for the frequency distribution
(e) Find the average dividend yields.
(f) Find the S.D. of the dividend yields.
Example: Find the S.D. of the following distribution.
Daily wages ($)
0 and above
10 and above
20 and above
30 and above
40 and above
50 and above

Number of workers
200
155
127
92
54
0

Solution: Calculation of S.D.

S.D

fX
N

Mid value( x )
5
15
25
35
45

Number of workers ( f )
45
28
35
38
54
N=200

Daily wages
0-10
10-20
20-30
30-40
40-50
Total

fX
N

fx
225
420
875
1330
2430
5280

fx 2
1125
6300
21875
46550
109350
185200

5280

926 696.96 = 15.13.

200
200

185200

Coefficient of Variation (C.V)

The coefficient of Variation, denoted by the symbol CV, measures the scatter in the data relative to the
mean. It may be computed as follows:
S.D
C.V
100 .
Mean
For a sample, C.V. =

s
100 . For a population, C.V.= 100 .

x
4

Example: The combined grade point average in different semesters of two students is shown below:
CGPA

Student

1
2.5
2.5

A
B

2
2.5
3.0

3
3.0
4.0

4
3.5
4.0

5
3.5
4.0

6
4.0
2.0

7
3.5
2.5

8
3.5
4.0

Which student would you consider better throughout the courses of studies?
Solution:
For student A,

26

xA

3.25

8
1

s
2
A

n1 1

sA

n1

(x

xA )

i 1

n1

n1 1

2
i

i 1

( x i )2

n1

(26)2

86.5

0.286.

0.286 0.535.

C.V. for A

sA
0.535
100
100 16.46%.
xA
3.25

For student B,
xB

sB2

26
8

3.25

1
n2 1

sB

n2

(x i xB )

i 1

n2

n2 1

i 1

2
xi

( x i )2

n2

(26)2

89.5

0.714.

0.714 0.845.

sB
0.845
100
100 26%
xB
3.25

C.V. for B

It is observed that the average CGPA of both students are same but C.V. of A is less than that of C.V.
of B. This implies that student A is better than B throughout the course of studies. The performance of
A is more homogeneous in all semesters.
Example: Find the coefficient of variation from the following frequency distribution giving the weekly
wages of 100 workers.
Wages (Taka)
Number of workers
260-269
6
270-279
14
280-289
29
290-299
23
300-309
16
310-319
10
320-329
2
Solution: Mean =

fx

291.2

fx

where
N
N
=13.9.
13.9
C.V
100 = 4.77%.
291.2
S.D

x Mid value

Example: The scores of two batsmen A and B in ten consecutive innings are as follows:

A:
B:

70
48

34
52

46
66

58
44

62
32

39
58

11
80

80
42

20
68

50
40

Find which batsman is more consistent in scoring.

Solution: For batsman A , x 47 and S.D 20.57 .
20.57
C.V
100 43.76% , For batsman B , x 53 and S.D 14.09 .
47
14.09
C.V
100 26.58%
53
Batsman B is more consistent (less variability) than the batsman A because 43.76% > 26.58%.
Example: The grade point averages obtained by randomly selected 6 students in their H.S.C.
examination are as follows: 4.9, 4.1, 4.4, 3.3, 4.6 and 4.8. Find mean, standard deviation and
coefficient of variation.
Solution.
Hence,

x 26.1. Then x

C.V .

26.1
4.35 and S.D. = 0.59.
6

s
0.59
100
100 13.56 %.
x
4.35

Among two or more data sets, the set for which coefficient of variation is greater is said to be more
variable or conversely less consistent, less uniform, less stable or less homogenous. On the other
hand, the series for which coefficient of variation is less is said to be less variability or more
consistent, more uniform, more stable or more homogenous.
Example: Lives of two models of refrigerators in a recent survey were found as follows:
Life (no. of years)
0-2
2-4
4-6
6-8
8-10
10-12

Model A
5
16
13
7
5
4

Model B
2
7
12
19
9
1

(i)
What is the average life of each model of these refrigerators?
(ii) Which of the two models shows more uniformity?
(iii)
A person wants to buy a new refrigerator, which one will he prefer?
Solution. For finding the average lifetimes, we have to compute arithmetic mean and for determining
the model which has greater uniformity, then compute and compare the coefficient of variations.
Class
interval

Mid-points
x

0-2
2-4
4-6
6-8
8-10
10-12
Total
Computations of
below:

Model A
f

Model B

fx

fx

1
3
5
7
9
11

5
5
5
16
48
144
13
65
325
7
49
343
5
35
405
4
44
484
50
256
1706
mean, variances and coefficient of variations
Model A

f
2
7
12
19
9
1
50
of lifetimes

fx

fx 2

2
2
21
63
60
300
133
931
81
729
11
121
308
2146
for two models are shown
Model B

Arithmetic Mean,

Standard Deviation:

C.V.:

256
5.12 years
50
2
256

1
2
SA
1706

49
50

1
1706 1310.72
49
395.28

8.07
49
S A 8.07 2.84 years
2.84
C.V . A
100 55.47%
5.12
XA

304
6.16 years
50
2
308

1
A
SB
2146

49
50

1
2146 1897.28
49
248.72

5.08
49
S B 5.08 2.25 years
2.25
C.V . B
100 36.53%
6.16
XB

(i)
(ii)

Average lifetimes of refrigerators of Model A is 5.12 years, while of Model B is 6.16 years.
Since coefficient of variation is less for Model B, hence refrigerators of Model B show
greater
uniformity as per the lifetime of the refrigerators.
(iii)
Due to the greater uniformity in lifetime, the person will prefer Model B.
Example: For two firms A and B belonging to same industry, the following details are available.
Number of Employees
Average Monthly Wage
Standard Deviation

Firm A
100
Taka 4800
Taka 600

Firm B
200
Taka 5100
Taka 540

Find (i) which firm pays out larger amount as wages? (ii) Which firm shows greater variability in the
distribution of wages? (iii) Find average monthly wage of all employees in both the firms.
Solution: (i) For finding out which firm pays larger amount, we have to find out

X nX .

X.

Firm A: n 100. X 4800 X n X 100 4800 480000 .

Firm B: n 200. X 5100 X n X 200 5100 1020000 .

Hence firm B pays larger amount as monthly wages.

(ii) For finding out which firm shows greater variability in the distribution of wages, we have to
calculate the coefficient of variation.
S.D
600
100
100 12.50 %.
Firm A: C.V
Mean
4800
S.D
540
100
100 10.59% .
Firm B: C.V
Mean
5700
Since the C.V. is greater in case of Firm A, it shows greater variability in the distribution of wages.
(iii) Combined average weekly wage

XC

n1 X 1 n2 X 2 100 4800 200 5100

Taka 5000 .
n
300