SET 2.

Q.1 What do you mean by sample survey? What are the different sampling
methods? Briefly describe them.

Ans: Sample is a finite subset of a population drawn from it to estimate the

characteristics of the population. Sampling is a tool which enables us to draw
conclusions about the characteristics of the population.

Survey sampling describes the process of selecting a sample of elements from

a target population in order to conduct a survey.
A survey may refer to many different types or techniques of observation, but in
the context of survey sampling it most often refers to a questionnaire used to
measure the characteristics and/or attitudes of people. The purpose of sampling
is to reduce the cost and/or the amount of work that it would take to survey the
entire target population. A survey that measures the entire target population is
called a census.

Sample survey can also be described as the technique used to study about a
population with the help of a sample. Population is the totality all objects about
which the study is proposed. Sample is only a portion of this population, which
is selected using certain statistical principles called sampling designs (this is for
guaranteeing that a representative sample is obtained for the study). Once the
sample decided information will be collected from this sample, which process is
called sample survey.

It is incumbent on the researcher to clearly define the target population. There

are no strict rules to follow, and the researcher must rely on logic and judgment.
The population is defined in keeping with the objectives of the study.

Sometimes, the entire population will be sufficiently small, and the researcher
can include the entire population in the study. This type of research is called a
census study because data is gathered on every member of the population.

Usually, the population is too large for the researcher to attempt to survey all of
its members. A small, but carefully chosen sample can be used to represent the
population. The sample reflects the characteristics of the population from which
it is drawn.

Sampling methods are classified as either probability or non-probability. In

probability samples, each member of the population has a known non-zero
probability of being selected. Probability methods include random sampling,
systematic sampling, and stratified sampling. In non-probability sampling,
members are selected from the population in some non-random manner. These
include convenience sampling, judgment sampling, quota sampling, and
snowball sampling. The advantage of probability sampling is that sampling
error can be calculated. Sampling error is the degree to which a sample might
differ from the population. When inferring to the population, results are
reported plus or minus the sampling error. In non-probability sampling, the
degree to which the sample differs from the population remains unknown.

Probability Sampling Methods:

1. Random sampling is the purest form of probability sampling. Each

member of the population has an equal and known chance of being
selected. When there are very large populations, it is often difficult or
impossible to identify every member of the population, so the pool of
available subjects becomes biased.
2. Systematic sampling is often used instead of random sampling. It is also
called an Nth name selection technique. After the required sample size has
been calculated, every Nth record is selected from a list of population
members. As long as the list does not contain any hidden order, this
sampling method is as good as the random sampling method. Its only
advantage over the random sampling technique is simplicity. Systematic
sampling is frequently used to select a specified number of records from a
computer file.
3. Stratified sampling is commonly used probability method that is superior
to random sampling because it reduces sampling error. A stratum is a
subset of the population that share at least one common characteristic.
Examples of stratums might be males and females, or managers and non-
managers. The researcher first identifies the relevant stratums and their
actual representation in the population. Random sampling is then used to
select a sufficient number of subjects from each stratum. "Sufficient" refers
to a sample size large enough for us to be reasonably confident that the
stratum represents the population.

Stratified sampling is often used when one or more of the stratums in the
population have a low incidence relative to the other stratums.

Non Probability Methods:

1. Convenience sampling is used in exploratory research where the

researcher is interested in getting an inexpensive approximation of the
truth. As the name implies, the sample is selected because they are
convenient. This non-probability method is often used during preliminary
research efforts to get a gross estimate of the results, without incurring the
cost or time required to select a random sample.
2. Judgment sampling is a common non-probability method. The researcher
selects the sample based on judgment. This is usually extension of
convenience sampling. For example, a researcher may decide to draw the
entire sample from one "representative" city, even though the population
includes all cities. When using this method, the researcher must be
confident that the chosen sample is truly representative of the entire
population.

3. Quota sampling is the non-probability equivalent of stratified sampling.

Like stratified sampling, the researcher first identifies the stratums and
their proportions as they are represented in the population. Then
convenience or judgment sampling is used to select the required number of
subjects from each stratum. This differs from stratified sampling, where the
stratums are filled by random sampling.

4. Snowball sampling is a special non-probability method used when the

desired sample characteristic is rare. It may be extremely difficult or cost
prohibitive to locate respondents in these situations. Snowball sampling
relies on referrals from initial subjects to generate additional subjects.
While this technique can dramatically lower search costs, it comes at the
expense of introducing bias because the technique itself reduces the
likelihood that the sample will represent a good cross section from the
population.

Q.2 What is the different between correlation and regression? What do

you understand by Rank Correlation? When we use rank correlation
and when we use Pearsonian Correlation Coefficient? Fit a linear
regression line in the following data –

X 12 15 18 20 27 34 28 48
Y 123 150 158 170 180 184 176 130

Solution: Correlation

When two or more variables move in sympathy with other, then they are said to
be correlated. If both variables move in the same direction then they are said to
be positively correlated. If the variables move in opposite direction then they
are said to be negatively correlated. If they move haphazardly then there is no
correlation between them.
Correlation analysis deals with
1) Measuring the relationship between variables.
2) Testing the relationship for its significance.
3) Giving confidence interval for population correlation measure.

Regression
Regression is defined as, “the measure of the average relationship between two
or more variables in terms of the original units of the data.” Correlation analysis
attempts to study the relationship between the two variables x and y. Regression
analysis attempts to predict the average x for a given y. In Regression it is
attempted to quantify the dependence of one variable on the other. The
dependence is expressed in the form of the equations.

Different between correlation and regression

Correlation and linear regression are not the same. Consider these differences:
• Correlation quantifies the degree to which two variables are related.
Correlation does not find a best-fit line (that is regression). You simply are
computing a correlation coefficient (r) that tells you how much one variable
tends to change when the other one does.

• With correlation you don't have to think about cause and effect. You simply
quantify how well two variables relate to each other. With regression, you
do have to think about cause and effect as the regression line is determined
as the best way to predict Y from X.

• With correlation, it doesn't matter which of the two variables you call "X"
and which you call "Y". You'll get the same correlation coefficient if you
swap the two. With linear regression, the decision of which variable you
call "X" and which you call "Y" matters a lot, as you'll get a different best-
fit line if you swap the two. The line that best predicts Y from X is not the
same as the line that predicts X from Y.

• Correlation is almost always used when you measure both variables. It

rarely is appropriate when one variable is something you experimentally
manipulate. With linear regression, the X variable is often something you
experimental manipulate (time, concentration...) and the Y variable is
something you measure.

• The correlation answers the STRENGTH of linear association between

paired variables, say X and Y. On the other hand, the regression tells us the
FORM of linear association that best predicts Y from the values of X.

(2a) Correlation is calculated whenever:

 – Both X and Y is measured in each subject and quantifies how much they
are linearly associated.
– In particular the Pearson's product moment correlation coefficient is used
when the assumption of both X and Y are sampled from normally-
distributed populations are satisfied
– Or the Spearman's moment order correlation coefficient is used if the
assumption of normality is not satisfied.
– Correlation is not used when the variables are manipulated, for example,
in experiments.

(2b) linear regression is used whenever:

– At least one of the independent variables (Xi's) is to predict the dependent

variable Y. Note: Some of the Xi's are dummy variables, i.e. Xi = 0 or 1,
which are used to code some nominal variables.
– If one manipulates the X variable, e.g. in an experiment.

• Linear regression are not symmetric in terms of X and Y. That is

interchanging X and Y will give a different regression model (i.e. X in
terms of Y) against the original Y in terms of X.
On the other hand, if you interchange variables X and Y in the calculation
of correlation coefficient you will get the same value of this correlation
coefficient.
• The "best" linear regression model is obtained by selecting the variables
(X's) with at least strong correlation to Y, i.e. >= 0.80 or <= -0.80

• The same underlying distribution is assumed for all variables in linear

regression. Thus, linear regression will underestimate the correlation of the
independent and dependent when they (X's and Y) come from different
underlying distributions.

Spearman's rank correlation coefficient or Spearman's rho, named after

Charles Spearman and often denoted by the Greek letter ρ (rho) or as rs, is a
nonparametric measure of correlation – that is, it assesses how well an arbitrary
monotonic function could describe the relationship between two variables,
without making any other assumptions about the particular nature of the
relationship between the variables. Certain other measures of correlation are
parametric in the sense of being based on possible relationships of a
parameterized form, such as a linear relationship.

In principle, ρ is simply a special case of the Pearson product-moment

coefficient in which two sets of data Xi and Yi are converted to rankings xi and yi
before calculating the coefficient. In practice, however, a simpler procedure is
normally used to calculate ρ. The raw scores are converted to ranks, and the
differences di, between the ranks of each observation on the two variables are
calculated.

If there are no tied ranks, then ρ is given by:

Where:
di = xi − yi = the difference between the ranks of corresponding values Xi and Yi,
and
n = the number of values in each data set (same for both sets).
If tied ranks exist, classic Pearson's correlation coefficient between ranks has to
be used instead of this formula.

One has to assign the same rank to each of the equal values. It is an average of
their positions in the ascending order of the values.
Conditions under which P.E can be used:

1. Samples should be drawn from a normal population.

2. The value of “r” must be determined from sample values.
3. Samples must have been selected at random.
Q.3 What do you mean by business forecasting? What are the different
methods of business forecasting? Describe the effectiveness of time-
series analysis as a mode of business forecasting. Describe the method
of moving averages.

Ans: Business forecasting refers to the analysis of past and present economic
conditions with the object of drawing inferences about probable future business
conditions. To forecast the future, various data, information and facts
concerning to economic condition of business for past and present are analyzed.
The process of forecasting includes the use of statistical and mathematical
methods for long term, short term, medium term or any specific term.

Following are the main methods of business forecasting:-

1. Business Barometers

Business indices are constructed to study and analyze the business activities on
the basis of which future conditions are predetermined. As business indices are
the indicators of future conditions, so they are also known as “Business
Barometers” or “Economic Barometers‟. With the help of these business
barometers the trend of fluctuations in business conditions are made known and
by forecasting a decision can be taken relating to the problem. The construction
of business barometer consists of gross national product, wholesale prices,
consumer prices, industrial production, stock prices, bank deposits etc. These
quantities may be converted into relatives on a certain base. The relatives so
obtained may be weighted and their average be computed. The index thus
arrived at in the business barometer.

The business barometers are of three types:

i. Barometers relating to general business activities: it is also known as

general index of business activity which refers to weighted or composite
indices of individual index business activities. With the help of general
index of business activity long term trend and cyclical fluctuations in the
„economic activities of a country are measured but in some specific cases
the long term trends can be different from general trends. These types of
index help in formation of country economic policies.
ii. Business barometers for specific business or industry: These barometers
are used as the supplement of general index of business activity and these
are constructed to measure the future variations in a specific business or
industry.
iii. Business barometers concerning to individual business firm: This type of
barometer is constructed to measure the expected variations in a specific
individual firm of an industry.

1. Time Series Analysis is also used for the purpose of making business
forecasting. The forecasting through time series analysis is possible only
when the business data of various years are available which reflects a
definite trend and seasonal variation.

3. Extrapolation is the simplest method of business forecasting. By

extrapolation, a businessman finds out the possible trend of demand of his
goods and about their future price trends also. The accuracy of extrapolation
depends on two factors:
i) Knowledge about the fluctuations of the figures,
ii) Knowledge about the course of events relating to the problem under
consideration.

4. Regression Analysis
The regression approach offers many valuable contributions to the solution of
the forecasting problem. It is the means by which we select from among the
many possible relationships between variables in a complex economy those
which will be useful for forecasting. Regression relationship may involve one
predicted or dependent and one independent variables simple regression, or it
may involve relationships between the variable to be forecast and several
independent variables under multiple regressions. Statistical techniques to
estimate the regression equations are often fairly complex and time-consuming
but there are many computer programs now available that estimate simple and
multiple regressions quickly.
5. Modern Econometric Methods
Econometric techniques, which originated in the eighteenth century, have
recently gained in popularity for forecasting. The term econometrics refers to
the application of mathematical economic theory and statistical procedures to
economic data in order to verify economic theorems. Models take the form of a
set of simultaneous equations. The value of the constants in such equations is
supplied by a study of statistical time series.

6. Exponential Smoothing Method

This method is regarded as the best method of business forecasting as compared

to other methods. Exponential smoothing is a special kind of weighted average
and is found extremely useful in short-term forecasting of inventories and sales.

7. Choice of a Method of Forecasting

The selection of an appropriate method depends on many factors – the context
of the forecast, the relevance and availability of historical data, the degree of
accuracy desired, the time period for which forecasts are required, the cost
benefit of the forecast to the company, and the time available for making the
analysis.

Effectiveness of Time Series Analysis:

Time series analysis is also used for the purpose of making business forecasting.
The forecasting through time series analysis is possible only when the business
data of various years are available which reflects a definite trend and seasonal
variation. By time series analysis the long term trend, secular trend, seasonal
and cyclical variations are ascertained, analyzed and separated from the data of
various years.

Merits:

i) It is an easy method of forecasting.

ii) By this method a comparative study of variations can be made.
iii) Reliable results of forecasting are obtained as this method is based on
mathematical model.

Method of Moving Averages:

One of the most simple and popular technical analysis indicators is the moving
averages method. This method is known for its flexibility and user-friendliness.
This method calculates the average price of the currency or stock over a period
of time.

The term “moving average” means that the average moves or follows a certain
trend. The aim of this tool is to indicate to the trader if there is a beginning of
any new trend or if there is a signal of end to the old trend. Traders use this
method, as it is relatively easy to understand the direction of the trends with the
help of moving averages.

Moving average method is supposed to be the simplest one, as it helps to

understand the chart patterns in an easier way. Since the currency’s average
price is considered, the price’s volatile movements are evened. This method
rules out the daily fluctuation in the prices and helps the trader to go with the
right trend, thus ensuring that the trader trades in his own good.

We come across different types of moving averages, which are based on the
way these averages are computed. Still, the basis of interpretation of averages is
similar across all the types. The computation of each type set itself different
from other in terms of weight age it lays on the prices of the currencies. Current
price trend is always given a higher weight age. The three basic types of moving
averages are viz. simple, linear and exponential.

A simple moving average is the simplest way to calculate the moving price
averages. The historical closing prices over certain time period are added. This
sum is divided by the number of instances used in summation. For example, if
the moving average is calculated for 15 days, the past 15 historical closing
prices are summed up and then divided by 15. This method is effective when
the number of prices considered is more, thus enabling the trader to understand
the trend and its future direction more effectively.

A linear moving average is the less used one out of all. But it solves the
problem of equal weight age. The difference between simple average and linear
average method is the weight age that is provided to the position of the prices in
the latter. Let’s consider the above example. In linear average method, the
closing price on the
15th day is multiplied by 15, the 14th day closing price by 14 and so on till the
1st day closing price by 1. These results are totalled and then divided by 15.

The exponential moving average method shares some similarity with the linear
moving average method. This method lays emphasis on the smoothing factor,
there by weighing recent data with higher points than the previous data. This
method is more receptive to any market news than the simple average method.
Hence this makes exponential method more popular among traders.
Moving averages methods help to identify the correct trends and their respective
levels of resistance.

Q.4 What is definition of Statistics? What are the different characteristics

of statistics? What are the different functions of Statistics? What are
the limitations of Statistics?

Ans: According to Croxton and Cowden, ‘Statistics is the science of collection,

presentation, analysis and interpretation of numerical data.’ Thus, Statistics
contains the tools and techniques required for the collection, presentation,
analysis and interpretation of data. This definition is precise and comprehensive.

Characteristic of Statistics:

a. Statistics Deals with aggregate of facts: Single figure cannot be analyzed.

b. Statistics are affected to a marked extent by multiplicity of causes: The
statistics of yield of paddy is the result of factors such as fertility of soil, amount
of rainfall, quality of seed used, quality and quantity of fertilizer used, etc.
c. Statistics are numerically expressed: Only numerical facts can be statistically
analyzed. Therefore, facts as ‘price decreases with increasing production’
cannot be called statistics.
d. Statistics are enumerated or estimated according to reasonable standards of
accuracy: The facts should be enumerated (collected from the field) or
estimated (computed) with required degree of accuracy. The degree of accuracy
differs from purpose to purpose. In measuring the length of screws, accuracy up
to a millimetre may be required, whereas, while measuring the heights of
students in a class, accuracy up to a centimetre is enough.
e. Statistics are collected in a systematic manner: The facts should be collected
according to planned and scientific methods. Otherwise, they are likely to be
wrong and misleading.
f. Statistics are collected for a pre-determined purpose: There must be a
definite purpose for collecting facts.
Eg. Movement of wholesale price of a commodity
g. Statistics are placed in relation to each other: The facts must be placed in
such a way that a comparative and analytical study becomes possible.
Thus, only related facts which are arranged in logical order can be called
statistics.

Functions of Statistics

1. It simplifies mass data

2. It makes comparison easier
3. It brings out trends and tendencies in the data
4. It brings out hidden relations between variables.
5. Decision making process becomes easier.
Major limitations of Statistics are:
1. Statistics does not deal with qualitative data. It deals only with quantitative
data.
2. Statistics does not deal with individual fact: Statistical methods can be
applied only to aggregate to facts.
3. Statistical inferences (conclusions) are not exact: Statistical inferences are
true only on an average. They are probabilistic statements.
4. Statistics can be misused and misinterpreted: Increasing misuse of Statistics
has led to increasing distrust in statistics.
5. Common men cannot handle Statistics properly: Only statisticians can
handle statistics properly.

Q.5 What are the different stages of planning a statistical survey? Describe
the various methods for collecting data in a statistical survey.
The planning stage consists of the following sequence of activities.

1. Nature of the problem to be investigated should be clearly defined in a un-

ambiguous manner.
2. Objectives of investigation should be stated at the outset. Objectives could
be to obtain certain estimates or to establish a theory or to verify an existing
statement to find relationship between characteristics etc.
3. The scope of investigation has to be made clear. It refers to area to be
covered, identification of units to be studied, nature of characteristics to be
observed, accuracy of measurements, analytical methods, time, cost and
other resources required.
4. Whether to use data collected from primary or secondary source should be
determined in advance.
5. The organization of investigation is the final step in the process. It
encompasses the determination of number of investigators required, their
training, supervision work needed, funds required etc.

Collection of primary data can be done by anyone of the following methods.

i. Direct personal observation
ii. Indirect oral interview
iii. Information through agencies
iv. Information through mailed questionnaires
i. Information through schedule filled by investigators

Q.6 What are the functions of classification? What are the requisites of a
good classification? What is Table and describe the usefulness of a
table in mode of presentation of data?

Ans: The functions of classification are:

a. It reduce the bulk data

b. It simplifies the data and makes the data more comprehensible
c. It facilitates comparison of characteristics
d. It renders the data ready for any statistical analysis

Requisites of good classification are:

i. Unambiguous: It should not lead to any confusion

ii. Exhaustive: every unit should be allotted to one and only one class
iii. Mutually exclusive: There should not be any overlapping.
iv. Flexibility: It should be capable of being adjusted to changing situation.
v. Suitability: It should be suitable to objectives of survey.
vi. Stability: It should remain stable throughout the investigation
vii.Homogeneity: Similar units are placed in the same class.
viii.Revealing: Should bring out essential features of the collected data.

Table is nothing but logical listing of related data in rows and columns.
Objectives of tabulation are:-

i. To simplify complex data

ii. To highlight important characteristics
iii. To present data in minimum space
iv. To facilitate comparison
v. To bring out trends and tendencies
vi. To facilitate further analysis