Professional Documents
Culture Documents
+ + + +
=
+ + + +
=
\
|
=
DCOVA
3-26
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Measures of Variation:
Comparing Coefficients of Variation
Stock A:
Average price last year = $50
Standard deviation = $5
Stock B:
Average price last year = $100
Standard deviation = $5
Both stocks
have the same
standard
deviation, but
stock B is less
variable relative
to its price
10% 100%
$50
$5
100%
X
S
CV
A
= =
|
|
.
|
\
|
=
5% 100%
$100
$5
100%
X
S
CV
B
= =
|
|
.
|
\
|
=
DCOVA
3-27
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Measures of Variation:
Comparing Coefficients of Variation
Stock A:
Average price last year = $50
Standard deviation = $5
Stock C:
Average price last year = $8
Standard deviation = $2
Stock C has a
much smaller
standard
deviation but a
much higher
coefficient of
variation
10% 100%
$50
$5
100%
X
S
CV
A
= =
|
|
.
|
\
|
=
25% 100%
$8
$2
100%
X
S
CV
C
= =
|
|
.
|
\
|
=
DCOVA
(continued)
3-28
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Locating Extreme Outliers:
Z-Score
To compute the Z-score of a data value, subtract the
mean and divide by the standard deviation.
The Z-score is the number of standard deviations a
data value is from the mean.
A data value is considered an extreme outlier if its Z-
score is less than -3.0 or greater than +3.0.
The larger the absolute value of the Z-score, the
farther the data value is from the mean.
DCOVA
3-29
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Locating Extreme Outliers:
Z-Score
where X represents the data value
X is the sample mean
S is the sample standard deviation
S
X X
Z
=
DCOVA
3-30
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Locating Extreme Outliers:
Z-Score
Suppose the mean math SAT score is 490, with a
standard deviation of 100.
Compute the Z-score for a test score of 620.
3 . 1
100
130
100
490 620
= =
=
S
X X
Z
A score of 620 is 1.3 standard deviations above the
mean and would not be considered an outlier.
DCOVA
3-31
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Shape of a Distribution
Describes how data are distributed
Two useful shape related statistics are:
Skewness
Measures the amount of asymmetry in a distribution
Kurtosis
Measures the relative concentration of values in the center
of a distribution as compared with the tails
DCOVA
3-32
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Shape of a Distribution
(Skewness)
Describes the amount of asymmetry in distribution
Symmetric or skewed
Mean = Median
Mean < Median Median < Mean
Right-Skewed Left-Skewed Symmetric
DCOVA
Skewness
Statistic
< 0 0 >0
3-33
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Shape of a Distribution
(Kurtosis)
Describes relative concentration of values in the
center as compared to the tails
Sharper Peak
Than Bell-Shaped
Flatter Than
Bell-Shaped
Bell-Shaped
DCOVA
Kurtosis
Statistic
< 0 0 >0
3-34
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
General Descriptive Stats Using
Microsoft Excel Functions
DCOVA
3-35
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
General Descriptive Stats Using
Microsoft Excel Data Analysis Tool
1. Select Data.
2. Select Data Analysis.
3. Select Descriptive
Statistics and click OK.
DCOVA
3-36
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
General Descriptive Stats Using
Microsoft Excel
4. Enter the cell
range.
5. Check the
Summary
Statistics box.
6. Click OK
DCOVA
3-37
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Excel output
Microsoft Excel
descriptive statistics output,
using the house price data:
House Prices:
$2,000,000
500,000
300,000
100,000
100,000
DCOVA
3-38
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Quartile Measures
Quartiles split the ranked data into 4 segments with
an equal number of values per segment
25%
The first quartile, Q
1
, is the value for which 25% of the
observations are smaller and 75% are larger
Q
2
is the same as the median (50% of the observations
are smaller and 50% are larger)
Only 25% of the observations are greater than the third
quartile
Q1 Q2 Q3
25% 25% 25%
DCOVA
3-39
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Quartile Measures:
Locating Quartiles
Find a quartile by determining the value in the
appropriate position in the ranked data, where
First quartile position: Q
1
= (n+1)/4 ranked value
Second quartile position: Q
2
= (n+1)/2 ranked value
Third quartile position: Q
3
= 3(n+1)/4 ranked value
where n is the number of observed values
DCOVA
3-40
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Quartile Measures:
Calculation Rules
When calculating the ranked position use the
following rules
If the result is a whole number then it is the ranked
position to use
If the result is a fractional half (e.g. 2.5, 7.5, 8.5, etc.)
then average the two corresponding data values.
If the result is not a whole number or a fractional half
then round the result to the nearest integer to find the
ranked position.
DCOVA
3-41
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
(n = 9)
Q
1
is in the (9+1)/4 = 2.5 position of the ranked data
so use the value half way between the 2
nd
and 3
rd
values,
so Q
1
= 12.5
Quartile Measures:
Locating Quartiles
Sample Data in Ordered Array: 11 12 13 16 16 17 18 21 22
Q
1
and Q
3
are measures of non-central location
Q
2
= median, is a measure of central tendency
DCOVA
3-42
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
(n = 9)
Q
1
is in the (9+1)/4 = 2.5 position of the ranked data,
so Q
1
= (12+13)/2 = 12.5
Q
2
is in the (9+1)/2 = 5
th
position of the ranked data,
so Q
2
= median = 16
Q
3
is in the 3(9+1)/4 = 7.5 position of the ranked data,
so Q
3
= (18+21)/2 = 19.5
Quartile Measures
Calculating The Quartiles: Example
Sample Data in Ordered Array: 11 12 13 16 16 17 18 21 22
Q
1
and Q
3
are measures of non-central location
Q
2
= median, is a measure of central tendency
DCOVA
3-43
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Quartile Measures:
The Interquartile Range (IQR)
The IQR is Q
3
Q
1
and measures the spread in the
middle 50% of the data
The IQR is also called the midspread because it covers
the middle 50% of the data
The IQR is a measure of variability that is not
influenced by outliers or extreme values
Measures like Q
1
, Q
3
, and IQR that are not influenced
by outliers are called resistant measures
DCOVA
3-44
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Calculating The Interquartile
Range
Median
(Q
2
)
X
maximum
X
minimum
Q
1
Q
3
Example:
25% 25% 25% 25%
12 30 45 57 70
Interquartile range
= 57 30 = 27
DCOVA
3-45
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Five Number Summary
The five numbers that help describe the center, spread
and shape of data are:
X
smallest
First Quartile (Q
1
)
Median (Q
2
)
Third Quartile (Q
3
)
X
largest
DCOVA
3-46
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Relationships among the five-number
summary and distribution shape
Left-Skewed Symmetric Right-Skewed
Median X
smallest
>
X
largest
Median
Median X
smallest
X
largest
Median
Median X
smallest
<
X
largest
Median
Q
1
X
smallest
>
X
largest
Q
3
Q
1
X
smallest
X
largest
Q
3
Q
1
X
smallest
<
X
largest
Q
3
Median Q
1
>
Q
3
Median
Median Q
1
Q
3
Median
Median Q
1
<
Q
3
Median
DCOVA
3-47
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Five Number Summary and
The Boxplot
The Boxplot: A Graphical display of the data
based on the five-number summary:
Example:
X
smallest
-- Q
1
-- Median -- Q
3
-- X
largest
25% of data 25% 25% 25% of data
of data of data
X
smallest
Q
1
Median Q
3
X
largest
DCOVA
3-48
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Five Number Summary:
Shape of Boxplots
If data are symmetric around the median then the box
and central line are centered between the endpoints
A Boxplot can be shown in either a vertical or horizontal
orientation
X
smallest
Q
1
Median Q
3
X
largest
DCOVA
3-49
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Distribution Shape and
The Boxplot
Right-Skewed Left-Skewed Symmetric
Q
1
Q
2
Q
3
Q
1
Q
2
Q
3
Q
1
Q
2
Q
3
DCOVA
3-50
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Boxplot Example
Below is a Boxplot for the following data:
0 2 2 2 3 3 4 5 5 9 27
The data are right skewed, as the plot depicts
0 2 3 5 27
0 2 3 5 27
X
smallest
Q
1
Q
2
Q
3
X
largest
DCOVA
3-51
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Numerical Descriptive
Measures for a Population
Descriptive statistics discussed previously described a
sample, not the population.
Summary measures describing a population, called
parameters, are denoted with Greek letters.
Important population parameters are the population mean,
variance, and standard deviation.
DCOVA
3-52
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Numerical Descriptive Measures
for a Population: The mean
The population mean is the sum of the values in
the population divided by the population size, N
N
X X X
N
X
N 2 1
N
1 i
i
+ + +
= =
=
= population mean
N = population size
X
i
= i
th
value of the variable X
Where
DCOVA
3-53
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Average of squared deviations of values from
the mean
Population variance:
Numerical Descriptive Measures
For A Population: The Variance
2
N
) (X
N
1 i
2
i
2
=
=
Where = population mean
N = population size
X
i
= i
th
value of the variable X
DCOVA
3-54
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Numerical Descriptive Measures For A
Population: The Standard Deviation
Most commonly used measure of variation
Shows variation about the mean
Is the square root of the population variance
Has the same units as the original data
Population standard deviation:
N
) (X
N
1 i
2
i
=
=
DCOVA
3-55
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Sample statistics versus
population parameters
Measure Population
Parameter
Sample
Statistic
Mean
Variance
Standard
Deviation
X
2
S
S
2
o
o
DCOVA
3-56
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The empirical rule approximates the variation of
data in a bell-shaped distribution
Approximately 68% of the data in a bell shaped
distribution is within 1 standard deviation of the
mean or
The Empirical Rule
1
68%
1
DCOVA
3-57
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Approximately 95% of the data in a bell-shaped
distribution lies within two standard deviations of the
mean, or 2
Approximately 99.7% of the data in a bell-shaped
distribution lies within three standard deviations of the
mean, or 3
The Empirical Rule
3
99.7%
95%
2
DCOVA
3-58
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Using the Empirical Rule
Suppose that the variable Math SAT scores is bell-
shaped with a mean of 500 and a standard deviation
of 90. Then,
68% of all test takers scored between 410 and 590
(500 90).
95% of all test takers scored between 320 and 680
(500 180).
99.7% of all test takers scored between 230 and 770
(500 270).
DCOVA
3-59
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Regardless of how the data are distributed,
at least (1 - 1/k
2
) x 100% of the values will
fall within k standard deviations of the mean
(for k > 1)
Examples:
(1 - 1/2
2
) x 100% = 75% ........ k=2 ( 2)
(1 - 1/3
2
) x 100% = 89% . k=3 ( 3)
Chebyshev Rule
within At least
DCOVA
3-60
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Covariance
The covariance measures the strength of the linear
relationship between two numerical variables (X & Y)
The sample covariance:
Only concerned with the strength of the relationship
No causal effect is implied
1 n
) Y Y )( X X (
) Y , X ( cov
n
1 i
i i
=
=
DCOVA
3-61
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Covariance between two variables:
cov(X,Y) > 0 X and Y tend to move in the same direction
cov(X,Y) < 0 X and Y tend to move in opposite directions
cov(X,Y) = 0 X and Y are independent
The covariance has a major flaw:
It is not possible to determine the relative strength of the
relationship from the size of the covariance
Interpreting Covariance
DCOVA
3-62
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Coefficient of Correlation
Measures the relative strength of the linear
relationship between two numerical variables
Sample coefficient of correlation:
where
Y X
S S
Y) , (X cov
r =
1 n
) X (X
S
n
1 i
2
i
X
=
=
1 n
) Y )(Y X (X
Y) , (X cov
n
1 i
i i
=
1 n
) Y (Y
S
n
1 i
2
i
Y
=
=
DCOVA
3-63
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Features of the
Coefficient of Correlation
The population coefficient of correlation is referred as .
The sample coefficient of correlation is referred to as r.
Either or r have the following features:
Unit free
Ranges between 1 and 1
The closer to 1, the stronger the negative linear relationship
The closer to 1, the stronger the positive linear relationship
The closer to 0, the weaker the linear relationship
DCOVA
3-64
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Scatter Plots of Sample Data with
Various Coefficients of Correlation
Y
X
Y
X
Y
X
Y
X
r = -1 r = -.6
r = +.3 r = +1
Y
X
r = 0
DCOVA
3-65
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Coefficient of Correlation Using
Microsoft Excel Function
DCOVA
3-66
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Coefficient of Correlation Using
Microsoft Excel Data Analysis Tool
1. Select Data
2. Choose Data Analysis
3. Choose Correlation &
Click OK
DCOVA
3-67
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Coefficient of Correlation
Using Microsoft Excel
4. Input data range and select
appropriate options
5. Click OK to get output
DCOVA
3-68
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Interpreting the Coefficient of Correlation
Using Microsoft Excel
r = .733
There is a relatively
strong positive linear
relationship between test
score #1 and test score
#2.
Students who scored high
on the first test tended to
score high on second test.
Scatter Plot of Test Scores
70
75
80
85
90
95
100
70 75 80 85 90 95 100
Test #1 Score
T
e
s
t
#
2
S
c
o
r
e
DCOVA
3-69
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Pitfalls in Numerical
Descriptive Measures
Data analysis is objective
Should report the summary measures that best
describe and communicate the important aspects of
the data set
Data interpretation is subjective
Should be done in fair, neutral and clear manner
DCOVA
3-70
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Ethical Considerations
Numerical descriptive measures:
Should document both good and bad results
Should be presented in a fair, objective and
neutral manner
Should not use inappropriate summary
measures to distort facts
DCOVA
3-71
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Chapter Summary
Described measures of central tendency
Mean, median, mode, geometric mean
Described measures of variation
Range, interquartile range, variance and standard
deviation, coefficient of variation, Z-scores
Illustrated shape of distribution
Skewness & Kurtosis
Described data using the 5-number summary
Boxplots
3-72
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Chapter Summary
Discussed covariance and correlation
coefficient
Addressed pitfalls in numerical descriptive
measures and ethical considerations
(continued)
3-73
Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.