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BUS511.

3: Business Statistics
Mohammad Arman, Ph.D.
North South University

Slide 1
Non Graphical Descriptive Statistics

n also called “Numerical” descriptive statistics


n do not use diagrammatic illustrations to describe
data
n Rather uses single numbers to describe data
n These “numbers” describe a different aspect of the
data:
• … Some are concerned with the central number to
which the data converges,
• … Others describe how dispersed the data is, etc.
• … Some others describe how the data compares to
other data, etc.

Slide 2
Non Graphical Descriptive Statistics

n Measures of Location
n Measures of Variability
n Measures of Relative Location and Detecting
Outliers
n Measures of Association Between Two Variables
n The Weighted Mean

x
Slide 3
Measures of Location

n Mean
n Median
n Mode
n Percentiles
n Quartiles

Slide 4
Example: Apartment Rents

Given below is a sample of monthly rent values ($)


for one-bedroom apartments. The data is a sample of 70
apartments in a particular city. The data are presented
in ascending order.
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 5
Mean

n The mean of a data set is the average of all the data


values.
n If the data are from a sample, the mean is denoted by x

 xi
x
n
n If the data are from a population, the mean is denoted by
m (mu)
 xi

N

Slide 6
Example: Apartment Rents

n Mean
 xi 34 , 356
x   490.80
n 70
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 7
Median

n The median is the measure of location most often


reported for annual income and property value data.
n A few extremely large incomes or property values
can inflate the mean.

Slide 8
Median

n The median of a data set is the value in the middle


when the data items are arranged in ascending order.
n For an odd number of observations, the median is the
middle value.
n For an even number of observations, the median is
the average of the two middle values.

Slide 9
Example: Apartment Rents

n Median
Median = 50th percentile
i = (p/100)n = (50/100)70 = 35.5
Averaging the 35th and 36th data values:
Median = (475 + 475)/2 = 475
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 10
Mode

n The mode of a data set is the value that occurs with


greatest frequency.
n The greatest frequency can occur at two or more
different values.
n If the data have exactly two modes, the data are
bimodal.
n If the data have more than two modes, the data are
multimodal.

Slide 11
Example: Apartment Rents

n Mode
450 occurred most frequently (7 times)
Mode = 450
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 12
Percentiles

n A percentile provides information about how the


data are spread over the interval from the smallest
value to the largest value.
n Admission test scores for colleges and universities
are frequently reported in terms of percentiles.

Slide 13
Percentiles

n The pth percentile of a data set is a value such that at


least p percent of the items take on this value or less
and at least (100 - p) percent of the items take on this
value or more.
• Arrange the data in ascending order.
• Compute index i, the position of the pth percentile.
i = (p/100)n
• If i is not an integer, round up. The pth percentile is
the value in the ith position.
• If i is an integer, the pth percentile is the average of
the values in positions i and i+1.

Slide 14
Example: Apartment Rents

n 90th Percentile
i = (p/100)n = (90/100)70 = 63
Averaging the 63rd and 64th data values:
90th Percentile = (580 + 590)/2 = 585
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 15
Quartiles

n Quartiles are specific percentiles


n First Quartile = 25th Percentile
n Second Quartile = 50th Percentile = Median
n Third Quartile = 75th Percentile

Slide 16
Example: Apartment Rents

n Third Quartile
Third quartile = 75th percentile
i = (p/100)n = (75/100)70 = 52.5 = 53
Third quartile = 525
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 17
Measures of Variability

n It is often desirable to consider measures of


variability (dispersion), as well as measures of
location.
n For example, in choosing supplier A or supplier B we
might consider not only the average delivery time for
each, but also the variability in delivery time for each.

Slide 18
Measures of Variability

n Range
n Interquartile Range
n Variance
n Standard Deviation
n Coefficient of Variation

Slide 19
Range

n The range of a data set is the difference between the


largest and smallest data values.
n It is the simplest measure of variability.
n It is very sensitive to the smallest and largest data
values.

Slide 20
Example: Apartment Rents

n Range
Range = largest value - smallest value
Range = 615 - 425 = 190
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 21
Interquartile Range

n The interquartile range of a data set is the difference


between the third quartile and the first quartile.
n It is the range for the middle 50% of the data.
n It overcomes the sensitivity to extreme data values.

Slide 22
Example: Apartment Rents

n Interquartile Range
3rd Quartile (Q3) = 525
1st Quartile (Q1) = 445
Interquartile Range = Q3 - Q1 = 525 - 445 = 80
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 23
Variance

n The variance is a measure of variability that utilizes


all the data.
n It is based on the difference between the value of
each observation (xi) and the mean (x for a sample, 
for a population).

Slide 24
Variance

n The variance is the average of the squared differences


between each data value and the mean.
n If the data set is a sample, the variance is denoted by
s2.
2  ( xi  x )
2
s 
n 1

n If the data set is a population, the variance is denoted


by  2.

 ( x   ) 2
2  i
N

Slide 25
Standard Deviation

n The standard deviation of a data set is the positive


square root of the variance.
n It is measured in the same units as the data, making
it more easily comparable, than the variance, to the
mean.
n If the data set is a sample, the standard deviation is
denoted s. s  s2

n If the data set is a population, the standard deviation


is denoted  (sigma).   2

Slide 26
Coefficient of Variation

n The coefficient of variation indicates how large the


standard deviation is in relation to the mean.
n If the data set is a sample, the coefficient of variation
is computed as follows:
s
(100)
x
n If the data set is a population, the coefficient of
variation is computed as follows:

(100)

Slide 27
Example: Apartment Rents

n Variance
2
s   ( xi  x ) 2
 2 , 996.16
n 1
n Standard Deviation

s  s2  2996. 47  54. 74
n Coefficient of Variation
s 54. 74
 100   100  11.15
x 490.80

Slide 28
Measures of Relative Location
and Detecting Outliers
n z-Scores
n Chebyshev’s Theorem
n Empirical Rule
n Detecting Outliers

Slide 29
z-Scores

n The z-score is often called the standardized value.


n It denotes the number of standard deviations a data
value xi is from the mean.
xi  x
zi 
s
n A data value less than the sample mean will have a z-
score less than zero.
n A data value greater than the sample mean will have
a z-score greater than zero.
n A data value equal to the sample mean will have a z-
score of zero.

Slide 30
Example: Apartment Rents

n z-Score of Smallest Value (425)


xi  x 425  490.80
z   1. 20
s 54. 74
Standardized Values for Apartment Rents
-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

Slide 31
Chebyshev’s Theorem

At least (1 - 1/k2) of the items in any data set will be


within k standard deviations of the mean, where k is
any value greater than 1.
• At least 75% of the items must be within
k = 2 standard deviations of the mean.
• At least 89% of the items must be within
k = 3 standard deviations of the mean.
• At least 94% of the items must be within
k = 4 standard deviations of the mean.

Slide 32
Example: Apartment Rents

n Chebyshev’s Theorem

Let k = 1.5 with x = 490.80 and s = 54.74


At least (1 - 1/(1.5)2) = 1 - 0.44 = 0.56 or 56%
of the rent values must be between
x - k(s) = 490.80 - 1.5(54.74) = 409
and
x + k(s) = 490.80 + 1.5(54.74) = 573

Slide 33
Example: Apartment Rents

n Chebyshev’s Theorem (continued)


Actually, 86% of the rent values
are between 409 and 573.
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 34
Empirical Rule

For data having a bell-shaped distribution:

• Approximately 68% of the data values will be


within one standard deviation of the mean.

Slide 35
Empirical Rule

For data having a bell-shaped distribution:

• Approximately 95% of the data values will be


within two standard deviations of the mean.

Slide 36
Empirical Rule

For data having a bell-shaped distribution:

• Almost all (99.7%) of the items will be


within three standard deviations of the mean.

Slide 37
Example: Apartment Rents

n Empirical Rule
Interval % in Interval
Within +/- 1s 436.06 to 545.54 48/70 = 69%
Within +/- 2s 381.32 to 600.28 68/70 = 97%
Within +/- 3s 326.58 to 655.02 70/70 = 100%
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 38
Detecting Outliers

n An outlier is an unusually small or unusually large


value in a data set.
n A data value with a z-score less than -3 or greater
than +3 might be considered an outlier.
n It might be an incorrectly recorded data value.
n It might be a data value that was incorrectly included
in the data set.
n It might be a correctly recorded data value that
belongs in the data set !

Slide 39
Example: Apartment Rents

n Detecting Outliers
The most extreme z-scores are -1.20 and 2.27.
Using |z| > 3 as the criterion for an outlier,
there are no outliers in this data set.
Standardized Values for Apartment Rents
-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

Slide 40
Measures of Association
Between Two Variables
n Covariance
n Correlation Coefficient

Slide 41
Covariance

n The covariance is a measure of the linear association


between two variables.
n Positive values indicate a positive relationship.
n Negative values indicate a negative relationship.

Slide 42
Covariance

n If the data sets are samples, the covariance is denoted


by sxy.
 ( xi  x )( yi  y )
sxy 
n 1
n If the data sets are populations, the covariance is
 xy by
denoted .

 ( xi   x )( yi   y )
 xy 
N

Slide 43
Correlation Coefficient

n The coefficient can take on values between -1 and +1.


n Values near -1 indicate a strong negative linear
relationship.
n Values near +1 indicate a strong positive linear
relationship.
n If the data sets are samples, the coefficient is rxy.
sxy
rxy 
sx s y

 xy
 xy 
 x y

n If the data sets are populations, the coefficient is  xy .Slide 44


Weighted Mean

n When the mean is computed by giving each data


value a weight that reflects its importance, it is
referred to as a weighted mean.
n In the computation of a grade point average (GPA),
the weights are the number of credit hours earned for
each grade.
n When data values vary in importance, the analyst
must choose the weight that best reflects the
importance of each value.

Slide 45
Weighted Mean

x =  wi xi
 wi

where:
xi = value of observation i
wi = weight for observation i

Slide 46
Grouped Data

n The weighted mean computation can be used to


obtain approximations of the mean, variance, and
standard deviation for the grouped data.
n To compute the weighted mean, we treat the
midpoint of each class as though it were the mean of
all items in the class.
n We compute a weighted mean of the class midpoints
using the class frequencies as weights.
n Similarly, in computing the variance and standard
deviation, the class frequencies are used as weights.

Slide 47
Mean for Grouped Data

n Sample Data

x
 fMi i

f i

n Population Data

  fMi i

N
where:
fi = frequency of class i
Mi = midpoint of class i

Slide 48
Example: Apartment Rents

Given below is the previous sample of monthly rents


for one-bedroom apartments presented here as grouped
data in the form of a frequency distribution.
Rent ($) Frequency
420-439 8
440-459 17
460-479 12
480-499 8
500-519 7
520-539 4
540-559 2
560-579 4
580-599 2
600-619 6
Slide 49
Example: Apartment Rents

n Mean for Grouped Data


Rent ($) fi Mi f iMi
420-439 8 429.5 3436.0 34 , 525
x  493. 21
440-459 17 449.5 7641.5 70
460-479 12 469.5 5634.0 This approximation
480-499 8 489.5 3916.0
differs by $2.41 from
500-519 7 509.5 3566.5
520-539 4 529.5 2118.0 the actual sample
540-559 2 549.5 1099.0 mean of $490.80.
560-579 4 569.5 2278.0
580-599 2 589.5 1179.0
600-619 6 609.5 3657.0
Total 70 34525.0

Slide 50
Thanks
Courtesy: Statistics for Business and Economics,.
David R. Anderson, Dennis J. Sweeney,. and Thomas A. Williams

Slide 51

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