QUANTITATIVE

TECHNIQUES IN
BUSINESS
Statistical part
Measures of Central Tendency
A measure of central tendency is a single value
that attempts to describe a set of data by
identifying the central position within that set of
data. As such, measures of central tendency are
sometimes called measures of central location.
The mean, median and mode are all valid
measures of central tendency, but under
different conditions, some measures of central
tendency become more appropriate to use than
others.
Summary of when to use the
mean, median and mode
Mean (Arithmetic)
The mean (or average) is the most popular and well known measure
of central tendency. It can be used with both discrete and
continuous data, although its use is most often with continuous data.

An important property of the mean is that it includes every value in

your data set as part of the calculation. Because of this property, we
prefer it in symmetrical distribution where mean, median and mode
are equal. In addition, the mean is the only measure of central
tendency where the sum of the deviations of each value from the
mean is always zero. The mean has one main disadvantage that it
is influenced of outliers. So, in these cases mean is not an
appropriate measure.
Formulas of mean ungrouped
data and grouped data
Un-grouped data Group data

Arithmetic Mean = X/n Arithmetic Mean = fX/f

where where
X = Individual value
X = Individual value

n = Total number of
f = Frequency
values
Geometric mean
The Geometric Mean is a special type of
average where we multiply the numbers together
and then take the nth root, which is commonly
used to determine the performance results of an
investment or portfolio.
The geometric mean must be used when
working with percentages (which are derived
from values), whereas the standard arithmetic
mean will work with the values themselves.
Formulas of geometric mean
ungrouped data and grouped data

For ungrouped data For grouped data

G = (x1.x2.x3..xn)1/n
G = antilog [1/n]
Where, X is Individual value Where n is total of
and n is Total number of frequency
values. It is simplified by using
logarithms. We get:

Log G = 1/n(logx1+logx2+logx3.+logxn)

= 1/n
G = antilog [1/n]
Harmonic mean
The harmonic mean is defined as the
reciprocal of the arithmetic mean of
the reciprocal of the values.
The harmonic mean is an appropriate
type to be used in averaging certain
kinds of ratio or rate of change.
Formulas of harmonic mean
ungrouped data and grouped data

For ungrouped data For grouped data

H = Reciprocal of
H=
H=
Properties Of Arithmetic Mean

The sum of the deviations, of all the values of

x, from their arithmetic mean, is zero.

Justification:
Sum of deviation = (xi-) (i = 1,2,3.n )
= xi-n ()
= xi- xi =0 ()
Properties Of Arithmetic Mean

The product of the arithmetic mean and the

number of items gives the total of all items.
Justification:
The sum of squared deviation of the xis from the is
minimum. In other words (xi-)2 (xi-a), where a is an
arbitrary value other than the mean.

Justification:

(xi-a)2 = (xi-)2
= [(xi-)2+2(xi-)()+()2]
= (xi-)2+2 () (xi-)+n()2]
= (xi-)2+n ()2 [((xi-)=0]
This property is usually called the minimum
property of the mean.
If yi = axi+b (1 = 1,2,3,n, where a and b are any
two numbers and a 0, then +b.

Justification:
Now summing all values of is,
we obtain:
yi = axi + nb
Dividing both side by n, we get:
=a+
=a+b
This property is usually called the invariance of
the mean under linear transformation.
Property 5
If and are the arithmetic mean of two
samples of sizes n1 and n2 respectively
then, the arithmetic mean of the
distribution combining the two can be
calculated as:

This formula can be extended for still more

groups or samples.
Justification:
Median
The median is the score of the scale that
separates the upper half of the distribution from
the lower, that is to say, it divides the series of
data into two equal parts. The median can only
be found for quantitative variables.
The median is the middle score for a set of data
that has been arranged in order of magnitude.
The median is less affected by outliers and
skewed data.
Median In Individual
Series (ungrouped Data)
Example: The following figures represent the number of books
issued at the counter of a Statistics library on 11 different days. 96,
180, 98, 75, 270, 80, 102, 100, 94, 75 and 200. Calculate the median.
Median In Discrete Series
Example: Locate the median in the
following distribution.
Median In Continuous Series (grouped Data)
Example: Calculate the median for the following .
Mode
It is the size of that item which possesses the maximum frequency.
The mode is the most frequent score in our data set. Normally, the
mode is used for categorical data where we wish to know which is
the most common category. This is particularly problematic when we
have continuous data.
Ungrouped Data Individual series: The mode of this series can be
obtained by mere inspection. The number which occurs most often
is the mode.
Example: Locate mode in the data 7, 12, 8, 5, 9, 6, 10, 9, 4, 9, 9
Solution: On inspection, it is observed that the number 9 has
maximum frequency. Therefore 9 is the mode.
Note that if in any series, two or more numbers have the maximum
frequency,then the mode will be such series are called as Bi-modal,
Tri-modal or Multi-modal series.
Mode for Grouped Data
Example
Empirical Relation Between
Mean, Median And Mode