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Quantitative Technique
Quantitative Technique is a scientific approach to managerial decision-making. The successful use of Quantitative Technique for management would help the organization in solving complex problems on time, with greater accuracy and in the most economical way.
BROAD CLASSIFICATION
QUANTITATIVE TECHNIQUES
STATISTICAL TECHNIQUES
STATISTICAL TECHNIQUES
Methods of collecting Data Classification and tabulation of collected data Probability theory and sampling analysis. Correlation and Regression Analysis Index Numbers Time Series Analysis Ratio Analysis
Statistics: What?
Conveys a variety of meaning The term statistics refers to numerical facts such as averages, medians, percents, and index numbers that help us understand a variety of business and economic conditions.
Tables, Charts and Figures, commonly found in newspaper, books, reports, classroom lectures.
Statistics: What?
Definition of Statistics
C O D I A
Data
E.g: LPU
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What is Data?
It is the generic term for numerical information that has been obtained on a set of objects/individuals etc. The objects can be anything people, animals, etc.
What is Data?
Variable:
Some characteristic of the objects/individuals (e.g., height) Can take on different values (e.g., 51 , 56 , 62).
Data:
the values of a variable for a certain set of objects/individuals (e.g., the height values of all the players on the basketball team)
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Statistics: What?
Statistics Math
(Dont Panic)
Statistics =
Fundamental tool for all scientific inquiry Way of making sense out of data
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Limitations of Statistics
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MANAGEMENT i) Marketing: Selection of product mix Sales resources allocation Analysis market research information Sales forecasting ii) Production Production planning, control and analysis Evaluation of machine performance Quality control requirements Inventory control measures
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iii) iv)
Finance, Accounting and Investment: Financial forecast Budget preparation Cash flow analysis Capital budgeting Dividend and Portfolio management Financial planning Personnel Labour turnover rate Employment trends Performance appraisal Wage rates and incentive plans
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ECONOMICS Measure of GNP. Determination of business cycle Comparison of market prices Analysis of population Formulation of appropriate economic policies RESEARCH AND DEVELOPMENT Development of new product lines Optimum use of resources Evaluation of existing products
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What Is a Survey?
A survey is a series of questions asked of a group of people in order to gain information Information gathered can be facts, attitudes, feelings, beliefs
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Survey
Marketing:
A detailed study of a market or geographical area to gather data on attitudes, impressions, opinions, satisfaction level, etc., by polling a section of the population. To examine as to condition, situation, or value : To query (someone) in order to collect data for the analysis of some aspect of a group or area
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Examples of SURVEY A total of 250 city residents were surveyed about the project. 64 percent of the people surveyed said that the economy was doing well.
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Why Do a Survey?
The goal of any survey is to collect data which can be analyzed, and used to aid decisions.
Doing a survey requires planning planning what you want to ask; how to ask it; how many people to survey and how to reach them, either by mail, in person, or by telephone. Will you have team members asking the questions or will the respondents, those completing the survey, fill it out themselves? This guide addresses these issues step-bystep, so that you can make choices and initiate a survey as systematically as possible.
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What information do you need to define? How many will attend the Retirement Recognition and how many of this group will eat lunch. What decisions will this information impact? How much space is needed for the Retirement Recognition and how many lunches are needed.
In what format is the report needed? Excel spreadsheet with names and numbers or head count How will you deliver the survey to your audience? Email
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Planning a Survey
Deciding on a research question Choosing the format of your questions/Choosing the format of your interview--if you use an interview Editing your questions Sequencing your questions Refining your survey instrument Choosing a sampling strategy
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Fixed alternative
Yes/No
Reliable Not powerful
Scale
Open-ended
May not be properly answered May be difficult to score
Unstructured
Interviewer bias is a serious problem Data may not be hard to analyze
Semi-structured
Follow-up questions allowed Probably best for pilot studies
Structured
Standardized, reducing interviewer bias
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4. Avoid negations 5. Avoid irrelevant questions 6. Avoid poorly worded response options 7. Avoid big words 8. Avoid ambiguous words & phrases
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Sequencing Questions
To boost response rate, put innocuous questions first, personal questions last To increase accuracy, keep similar questions together To boost response rate, put demographic questions last
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Random sampling
Proportionate stratified random sampling
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Data Collection
Data collection is the act of assembling and gathering the needed information in the context of a specified research investigation. Primary Data Secondary Data
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Secondary Data
Data gathered by another source (e.g. research study, survey, interview) Secondary data is gathered BEFORE primary data. WHY? Because you want to find out what is already known about a subject before you dive into your own investigation. Because some of your questions can possibly have been already answered by other investigators or authors. Why reinvent the wheel?
Primary Data
Data never gathered before Advantage: find data you need to suit your purpose Disadvantage: usually more costly and time consuming than collecting secondary data Collected after secondary data is collected
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Internal Experts
Classification of Data
The
process of arranging the data in groups or classes according to their common characteristics is technically known as classification.
Or
"Classification
is the process of arranging data into sequences and groups according to their common characteristics or separating them into different but related parts. It is the first step in tabulation. Classification is the grouping of related facts into classes.
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Classification of Data
of
Data
is
Raw Data are so voluminous and huge. After collection of data next step is to organize, so as to present it in a manner to highlight the important characteristics of the data.
The process of sorting letters in a post office, the letters are classified according to the cities and further arranged according to streets. Number of students registered for LPU in 2011 may be classified on the basis of any of the following criterion:
Sex Age Country to which they belong Region Course(B-Tech, BA, B-Com, MBA)
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Functions of Classification
It
Present the huge raw data into condensed form, Highlight the significant features contained in the data. It facilitates comparisons. It helps to study relationship. It facilitates the statistical treatment of the data: Makes the more useful, intelligible.
Bases of Classification
(1) Qualitative Base (2) Quantitative Base (3)Geographical Base (4) Chronological or Temporal Base
(1) Qualitative Base: When the data are classified according to some quality or attributes such as sex, religion, literacy, intelligence etc (2) Quantitative Base: When the data are classified by quantitative characteristics like heights, weights, ages, income etc
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(3) Geographical Base: When the data are classified by geographical regions or location, like states, provinces, cities, countries etc (4) Chronological or Temporal Base: When the data are classified or arranged by their time of occurrence, such as years, months, weeks, days
Types of Classification:
(1) One -way Classification: If we classify observed data keeping in view single characteristic, this type of classification is known as one-way classification. For Example: The population of world may be classified by religion as Muslim, Christians etc (2) Two -way Classification: If we consider two characteristics at a time in order to classify the observed data then we are doing two way classifications. For Example: The population of world may be classified by Religion and Sex.
Types of Classification:
(3) Multi -way Classification: We may consider more than two characteristics at a time to classify given data or observed data. In this way we deal in multi-way classification. For Example: The population of world may be classified by Religion, Sex and Literacy.
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Tabulation of data
It is cumbersome to study or interpret large data without grouping it, even if it is arranged sequentially. For this, the data are usually organized into groups called classes and presented in a table which gives the frequency in each group. Such a frequency table gives a better overall view of the distribution of data and enables a person to rapidly comprehend important characteristics of the data
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For example, a test of 50 marks is administered on a class of 40 students and the marks obtained by these students are as listed below.
By going through the marks of 40 students listed in Table 12.5, you may be able to see that the marks vary from 16 to 48, but if you try to comprehend the overall performance it is a difficult proposition. Now consider the same set of marks, arranged in a tabular form
Types of Table
Single-column or single-row table Multiple-column and multiple-row tables Reference vs. summary tables
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Components of Table
Table number Title of table Head Note Stub and Stub-Heads: Main headings of rows Box Head and Stub-Heads: Data provided in
various columns Body of the Table: r*c Footnote: Sources
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Contingency table
Cross-section presentation of observed data in terms of any two attributes. Last column provides row table, last row gives column total.
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Frequency Distribution
A frequency distribution is an arrangement of the values that one or more variables take in a sample. The frequency is the number of values in a specific class of data. The researches organizes the raw data by using frequency distribution. A frequency distribution is the organizing of raw data in table form, using classes and frequencies.
100 people rate a five-point Likert scale assessing their agreement with a statement on a scale on which 1 denotes strong agreement and 5 strong disagreement, the frequency distribution of their responses might look like
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Cumulative Frequency
The cumulative frequency is the sum of the frequencies accumulated up to the upper boundary of a class in the distribution. They are used to visually represent how many values are below a certain upper class boundary.
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Tally Method:
Class A B O AB Tally
///// ///// ///// ///// // //// Total
Frequency 5 7 9 4 25
remain constant
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Histogram
The histogram is a graph that displays the data by using vertical bars of various heights to represent the frequencies. In statistics, a histogram is a graphical representation showing a visual impression of the distribution of data. It is an estimate of the probability distribution of a continuous variable and was first introduced by Karl Pearson. A histogram consists of tabular frequencies, shown as adjacent rectangles, erected over discrete intervals (bins), with an area equal to the frequency of the observations in the interval.
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Pie Chart
A pie chart is a circle that is divided into sections according to the percentage of frequencies in each category of the distribution.
Example
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Example Cont.
5% 3% 8% 33%
51%
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Bar Chart
A bar chart is a broader concept than histogram. A bar chart may be used to display concepts other than frequency of an observations. For example, a bar chart may display the average exam results. Histogram is a bar chart of frequency distribution.
For plotting a cumulative frequency curve or Ogive, first of all cumulative frequencies against each of the intervals are to be written. If we take the frequency distribution of Table it will be like
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One of the most important objectives of statistical analysis is to get one single value that describes the characteristics of the entire mass of the unwieldy data. Such a value is called the central value or an average or the expected value of the variable.
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Types of Averages
Arithmetic Mean Median Mode Geometric Mean Harmonic Mean Percentile Methods Decile Quartile
Arithmetic Mean
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Arithmetic Mean
Example: Apartment Rents Seventy efficiency apartments were randomly sampled in a small college town. The monthly rent prices for these apartments are given below.
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Arithmetic Mean
x
x
n
34, 356 70
490.80
Example: From the following data of the marks obtained by 60 students of a class.
Marks No of students
20 8
30 12
40 20
50 10
60 6
70 4
86
2460 41 60
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There are three different basketball teams and each has played five games. You have each team's score from each of its games.
Suppose you want to join one of the three basketball teams. You want to join the one that is doing the best so far. If you rank each team by their mean scores, which team would you join?
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Class Interval Arithmetic Mean : Arithmetic Mean = fX/f where X = Midpoint f = Frequency
Step 1: Find f. f = 17 Step 2:Then, Find the Midpoint for the class interval. Midpoint(X) = (10+20)/2, (20+30)/2, (30+40)/2 = 15, 25, 35 Step 3: Now, Find fX.
Step 4:Now, Substitute in the above formula given. Arithmetic mean = fX/f = 445/17 = 26.1765
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Frequency
4
15-19
20-24 25-29 30-34
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5 2 1
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Problem
A service station recorded the following frequency distribution for the number of gallons of gasoline sold per car in a sample of 689 cars. Gasoline(Gallons) Frequency
0-4 5-9 10-14 15-19 20-24 25-29 74 192 280 105 23 6
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Example: A student obtained 40, 50, 60, 80, and 45 marks in the subjects of Math, Statistics, Physics, Chemistry and Biology respectively. Assuming weights 5, 2, 4, 3, and 1 respectively for the above mentioned subjects. Find Weighted Arithmetic Mean per subject.
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Combined Mean
The arithmetic mean of several sets of data may be combined into a single arithmetic mean for the combined sets of data.
If a sample size of 22 items has a mean of 15 and another sample size of 18 items has a mean of 20. Find the mean of the combined sample?
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The mean marks of 100 students were found to be 40. Later on, it was discovered that a score of 53 was misread as 83. Find the correct mean corresponding to the correct score. Mean of 100 observations is found to be 40. If at the time of computation two items are taken as 30 and 27 instead of 3 and 72, find the correct mean.
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25
10
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Merits
Simplest and easiest to compute. Arraying of data is not required. Affected by the value of every item in the series It is a calculated value, and not based on position in the series.
Limitations
May affected by extreme values Distribution with open-end classes the mean cannot be computed.
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Geometric Mean
In many business and economics problems, we deal with quantities that change over a period of time. In such case the aim is to know an average rate of change rather than simple average value to represent the average growth or decline rate in a data set over a period of time. Thus we need to calculate another measure of central tendency, called geometric mean(G.M).
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Geometric Mean
The arithmetic mean is relevant any time several quantities add together to produce a total. The arithmetic mean answers the question, "if all the quantities had the same value, what would that value have to be in order to achieve the same total? In the same way, the geometric mean is relevant any time several quantities multiply together to produce a product. The geometric mean answers the question, "if all the quantities had the same value, what would that value have to be in order to achieve the same product?" For example, suppose you have an investment which earns 10% the first year, 50% the second year, and 30% the third year. What is its average rate of return? It is not the arithmetic mean, because what these numbers mean is that on the first year your investment was multiplied (not added to) by 1.10, on the second year it was multiplied by 1.60, and the third year it was multiplied by 1.20. The relevant quantity is the geometric mean of these three numbers.
Merits:
Used to find the average per cent increase in sales, production, population or other economic or business series. Considered best average in construction of index number
Limitations
Difficult to compute and interpret. Can not be computed if one or more of the values are zero.
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2000
2001 2002
2.5
5.0 10.0
115.69
121.47 133.61
The Simple arithmetic mean of the growth rate is, 6%. GM=???
A person has invested Rs 5000 in the stock market. At the end of the first year the amount has grown to Rs 6250; he has had a 25% profit. If at the end of second year his principal has grown to Rs 8750, the rate of increase is 40% for the year. What is the average rate of increase if his investment during the two years?
GM= sq of 1.25*1.40= 1.323 The average rate in the value of investment is therefore 1.323-1=0.323, which is multiplied by 100,gives the rate if increase as
Harmonic Mean
Harmonic mean (formerly sometimes called the subcontrary mean) is one of several kinds of average. HM is particularly useful in averaging rates and ratios, It is the most appropriate average where unit of observation(such as per day, per hour, per unit, per worker etc) remains the same and the act being performed, such as covering distance, is constant
The harmonic mean H of the positive real numbers x1,x2, ..., xn is defined to be
Ungroup Data Group Data
n 1 x i
n fi x i
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Harmonic Mean = N/(1/a1+1/a2+1/a3+1/a4+.......+1/aN) where X = Individual score N = Sample size (Number of scores)
Example: To find the Harmonic Mean of 1,2,3,4,5. Step 1: Calculate the total number of values. N=5 Step 2: Now find Harmonic Mean using the above formula. N/(1/a1+1/a2+1/a3+1/a4+.......+1/aN) = 5/(1/1+1/2+1/3+1/4+1/5) = 5/(1+0.5+0.33+0.25+0.2) = 5/2.28 So, Harmonic Mean = 2.19
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Assume that a investor buys Rs 1200 worth share of a company each month. If he has bought shares at a price of Rs 10, Rs 12, Rs 15, Rs, 20 and Rs 24 per share during each of the first five month of the year. Find the average share price. Ans: 14.63
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Example: A computer operator who bought three different brands of computer printout paper A, B and C at the rate of Rs. 110, Rs. 120, and Rs. 140 per packet of 100 pieces, respectively. Having spent Rs. 320 on brand A, Rs. 480 on brand B and Rs. 280 on band C. He may be interested to know the average price of the three brands of paper.
Solution: w=330+480+280= 1090 w/x= 330/110 +480/120 +280/140 = 9 H.M=1090/90= Rs 121.11(perPrepared By: Kapil Verma packet)
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Example: H.M
A cyclist covers his first five km; at an average speed of 10 km/h. another 3 km at 8km/h and the last two km. at 5 km find average speed Ans: 7.85
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Median
The median of a data set is the value in the middle when the data items are arranged in ascending order. Whenever a data set has extreme values, the median is the preferred measure of central location. A few extremely large incomes or property values can inflate the mean.
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Advantages:
Extreme values do not affect the median as strongly as they do the mean. Can be calculated with qualitative data
Disadvantages:
We can perform any calculation only after making it in order, may be a time consuming task
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Median
For an odd number of observations: 26 18 27 12 14 27 19 7 observations
12
14
18
19
26
27
27
in ascending order
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Median
For an even number of observations: 26 18 27 12 14 27 30 19 8 observations
12
14
18
19
26
27
27
30
in ascending order
the median is the average of the middle two values. Median = (19 + 26)/2 = 22.5
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Median
Averaging the 35th and 36th data values: Median = (475 + 475)/2 = 475
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Mode
The mode of a data set is the value that occurs with greatest frequency.
The greatest frequency can occur at two or more different values. If the data have exactly two modes, the data are bimodal. If the data have more than two modes, the data are multimodal. Use????
Mode.. Contd
Advantages:
Can be used with quantitative as well as with qualitative data. Not unduly affected by extreme values. We can use mode even when one or more classes are open
Disadvantages:
What if there is no modal value. It is difficult to interpret if data set contain two or more modal values.
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Quartile
The values of observations in a data set, when arranged in an ordered sequence, can be divided into four equal parts, or quarters, using three quartiles namely Q1, Q2, and Q3. The first quartile Q1 divides a distribution in such a way that 25% of observations have values less than Q1 and 75% have a value more than Q1.
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Deciles:
The values of observations in a data set when arranged in an ordered sequence can be divided into ten equal parts, using nine deciles
Percentile
The values of observations in a data when arranged in an ordered sequence into hundred equal parts using ninety nine percentiles,
The following distribution gives the pattern of overtime work per week done by 100 employees of a company. Calculate median, first quartile, and seventh decile.
10-15 15-20 20-25 25-30 30-35 35-40 11 20 35 20 8 6
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Dispersion
Measures of Dispersion
Range Mean Deviation Standard Deviation Variance Skewness
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Range
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Interfractile Range
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INTERQUARTILE RANGE
Difference between the third quartile and the first quartile. Interquartile range = Q3- Ql
161-162.9
163-164.9 165-166.9
3
7 14
167-168.9
169-170.9 171-172.9
12
10 4
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Ans.
Q1=165.3 Q3=169.3 QD=169
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MEAN DEVIATION
The mean deviation is also known as the average deviation. As the name implies, it is the average of absolute amounts by which the individual items deviate from the mean. Since the positive deviations from the mean are equal to the negative deviations, while computing the mean deviation, we ignore positive and negative signs.
Where MD = mean deviation, |d| = deviation of an item from the mean ignoring positive and negative signs, n = the total number of observations.
Standard Deviation
The standard deviation is similar to the mean deviation in that here too the deviations are measured from the mean. At the same time, the standard deviation is preferred to the mean deviation or the quartile deviation or the range because it has desirable mathematical properties. Before defining the concept of the standard deviation, we introduce another concept viz. variance
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Variance
The variance is a measure of variability that utilizes all the data.
It is based on the difference between the value of each observation (xi) and the mean (for a sample, x m for a population).
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Variance
The variance is the average of the squared differences between each data value and the mean.
( xi m ) N
2
for a population
for a sample
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Standard Deviation
The standard deviation of a data set is the positive square root of the variance.
It is measured in the same units as the data, making it more easily interpreted than the variance.
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Standard Deviation
The standard deviation is computed as follows:
s s2
for a sample
2
for a population
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Variance: Example
1 2 3 4 5 6 7 8 9 10 11 12 13 Mean Clippers' Player Height Deviation Squared deviation Earl Boykins 65 -13.54 183.29 Keyon Dooling 75 -3.54 12.52 Jeff McInnis 76 -2.54 6.44 Quentin Richardson 78 -0.54 0.29 Corey Maggette 78 -0.54 0.29 Eric Piatkowski 78 -0.54 0.29 Elton Brand 80 1.46 2.14 Harold Jamison 81 2.46 6.06 Darius Miles 81 2.46 6.06 Obinna Ekezie 81 2.46 6.06 Sean Rooks 82 3.46 11.98 Lamar Odom 82 3.46 11.98 Michael Olowokandi 84 5.46 29.83 Pre 78.54 par Sum 277.23 ed By: N-1 12 1/2=4.81inches Kap 23.10 s=(23.10) Variance (s 2) il
Ver 158 ma
Example:
The owner of the Ches Tahoe restaurant is interested in how much most of the people spend at the restaurant. He examines 10 randomly selected receipts for parties of four and writes down the following data. 44, 50, 38, 96, 42, 47, 40, 39, 46, 50