Data PDF

Statistics for
Business and Economics

6th Edition
Describing Data: Graphical

Types of Data
Data
Categorical Numerical
Examples:
Marital Status
Are you registered to Discrete Continuous
vote?
Eye Color Examples: Examples:
(Defined categories or Number of Children Weight
groups) Defects per hour Voltage
(Counted items) (Measured characteristics)
Statistics for Business and Economics, 6e 2007 Pearson Education, Inc. Chap 2-2
Measurement Levels
Differences between
measurements, true Ratio Data
zero exists
Quantitative Data
Differences between
measurements but no Interval Data
true zero
Ordered Categories
(rankings, order, or Ordinal Data
scaling)
Qualitative Data
Categories (no
ordering or direction) Nominal Data
Graphical
Presentation of Data
Data in raw form are usually not easy to use

for decision making
Some type of organization is needed
Table
Graph
The type of graph to use depends on the

variable being summarized
Graphical
Presentation of Data
(continued)
Techniques reviewed in this chapter:
Categorical Numerical
Variables Variables
Frequency distribution Line chart

Bar chart Frequency distribution
Pie chart Histogram and ogive
Pareto diagram Stem-and-leaf display
Scatter plot
Tables and Graphs for
Categorical Variables
Categorical
Data
Tabulating Data Graphing Data
Frequency
Distribution Bar Pie Pareto
Table Chart Chart Diagram
The Frequency
Distribution Table
Summarize data by category
Example: Hospital Patients by Unit

Hospital Unit Number of Patients
Cardiac Care 1,052

Emergency 2,245
Intensive Care 340
Maternity 552
Surgery 4,630
(Variables are
categorical)
Bar and Pie Charts
Bar charts and Pie charts are often used

for qualitative (category) data
Height of bar or size of pie slice shows the

frequency or percentage for each
category
Bar Chart Example
Hospital Number
Unit of Patients
Cardiac Care 1,052

Emergency 2,245 Hospital Patients by Unit
5000
Intensive Care 340
Maternity 552 4000
patients per year
Surgery 4,630
Number of
3000
2000
1000
0
Cardiac
Emergency
Maternity
Surgery
Intensive
Care
Care
Pie Chart Example
Hospital Number % of
Unit of Patients Total
Hospital Patients by Unit
Cardiac Care 1,052 11.93
Emergency 2,245 25.46 Cardiac Care
12%
Intensive Care 340 3.86
Maternity 552 6.26
Surgery 4,630 52.50
Emergency
Surgery 25%
53%
Intensive Care
(Percentages 4%
are rounded to Maternity
the nearest 6%
percent)
Graphs for Time-Series Data
A line chart (time-series plot) is used to show

the values of a variable over time
Time is measured on the horizontal axis
The variable of interest is measured on the

vertical axis
Line Chart Example
Magazine Subscriptions by Year
350
300
Thousands of subscribers
250
200
150
100
50
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Frequency Distributions
What is a Frequency Distribution?

A frequency distribution is a list or a table
containing class groupings (categories or
ranges within which the data fall) ...
and the corresponding frequencies with which
data fall within each class or category
Why Use Frequency Distributions?
A frequency distribution is a way to

summarize data
The distribution condenses the raw data
into a more useful form...
and allows for a quick visual interpretation
of the data
Class Intervals
and Class Boundaries
Each class grouping has the same width

Determine the width of each interval by
largest number smallest number
w interval width
number of desired intervals
Use at least 5 but no more than 15-20 intervals

Intervals never overlap
Round up the interval width to get desirable
interval endpoints
Frequency Distribution Example
Example: A manufacturer of insulation randomly

selects 20 winter days and records the daily
high temperature
24, 35, 17, 21, 24, 37, 26, 46, 58, 30,
32, 13, 12, 38, 41, 43, 44, 27, 53, 27
(continued)
Sort raw data in ascending order:

12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
Find range: 58 - 12 = 46
Select number of classes: 5 (usually between 5 and 15)
Compute interval width: 10 (46/5 then round up)
Determine interval boundaries: 10 but less than 20, 20 but

less than 30, . . . , 60 but less than 70
Count observations & assign to classes
(continued)
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
Relative
Interval Frequency Percentage
Frequency
10 but less than 20 3 .15 15
20 but less than 30 6 .30 30
30 but less than 40 5 .25 25
40 but less than 50 4 .20 20
50 but less than 60 2 .10 10
Total 20 1.00 100
Histogram
A graph of the data in a frequency distribution

is called a histogram
The interval endpoints are shown on the
horizontal axis
the vertical axis is either frequency, relative
frequency, or percentage
Bars of the appropriate heights are used to
represent the number of observations within
each class
Histogram Example
Interval Frequency
His togram : Daily High Te m pe rature
10 but less than 20 3
20 but less than 30 6 7 6
6 5
50 but less than 60 2 5 4
Frequency
4 3
3 2
2
1 0 0
(No gaps 0
between 0 0 10 10 2020 30 30 40 40 50 50 60 60 70
bars) Temperature in Degrees
How Many Class Intervals?
Many (Narrow class intervals) 3.5

3
may yield a very jagged distribution 2.5
Frequency
with gaps from empty classes 2
1.5
Can give a poor indication of how 1

0.5
frequency varies across classes 0
12
16
20
24
28
32
36
40
44
48
52
56
60
More
4
8
Temperature
Few (Wide class intervals) 12
10
may compress variation too much and 8
Frequency
yield a blocky distribution 6
4
can obscure important patterns of 2
variation. 0
0 30 60 More
Temperature
(X axis labels are upper class endpoints)
The Cumulative
Frequency Distribuiton
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
Cumulative Cumulative
Class Frequency Percentage
Frequency Percentage
10 but less than 20 3 15 3 15

20 but less than 30 6 30 9 45
30 but less than 40 5 25 14 70
40 but less than 50 4 20 18 90
50 but less than 60 2 10 20 100
Total 20 100
Distribution Shape
The shape of the distribution is said to be
symmetric if the observations are balanced,
or evenly distributed, about the center.
Symmetric Distribution
10
9
8
7
Frequency
6
5
4
3
2
1
0
1 2 3 4 5 6 7 8 9
Distribution Shape
(continued)
The shape of the distribution is said to be
skewed if the observations are not
symmetrically distributed around the center.
Positively Skewed Distribution
A positively skewed distribution 12
(skewed to the right) has a tail that

10
Frequency
extends to the right in the direction of 6
positive values.
4
0
1 2 3 4 5 6 7 8 9
Negatively Skewed Distribution

A negatively skewed distribution
12
(skewed to the left) has a tail that 10
extends to the left in the direction of 8

Frequency
6
negative values. 4
0
1 2 3 4 5 6 7 8 9
Scatter Diagrams
Scatter Diagrams are used for paired

observations taken from two
numerical variables
The Scatter Diagram:

one variable is measured on the vertical
axis and the other variable is measured

on the horizontal axis
Scatter Diagram Example
Volume Cost per

Cost per Day vs. Production Volume
per day day
23 125 250
26 140 200
Cost per Day
29 146
150
33 160
38 167 100
42 170 50
50 188
0
55 195
0 10 20 30 40 50 60 70
60 200
Volume per Day
Cross Tables
Cross Tables (or contingency tables) list the

number of observations for every combination
of values for two categorical or ordinal
variables
If there are r categories for the first variable

(rows) and c categories for the second
variable (columns), the table is called an r x c
cross table
Cross Table Example
4 x 3 Cross Table for Investment Choices by Investor

(values in $1000s)
Investment Investor A Investor B Investor C Total
Category
Stocks 46.5 55 27.5 129
Bonds 32.0 44 19.0 95
CD 15.5 20 13.5 49
Savings 16.0 28 7.0 51
Total 110.0 147 67.0 324
Graphing
Multivariate Categorical Data
(continued)
Side by side bar charts

Comparing Investors
S avings
CD
B onds
S toc ks
0 10 20 30 40 50 60
Investor A Investor B Investor C
Statistics for
Business and Economics
6th Edition
Describing Data: Numerical

Describing Data Numerically
Describing Data Numerically
Central Tendency Variation
Arithmetic Mean Range
Median Interquartile Range
Mode Variance
Standard Deviation
Coefficient of Variation
Measures of Central Tendency
Overview
Central Tendency
Mean Median Mode
x i
x i1
n
Arithmetic Midpoint of Most frequently
average ranked values observed value
Arithmetic Mean
The arithmetic mean (mean) is the most
common measure of central tendency
For a population of N values:
N
x
x1 x 2 x N
i Population
i1
values
N N
Population size
For a sample of size n:

n
x i
x1 x 2 x n Observed
x i1
values
n n
Sample size
Arithmetic Mean
(continued)
The most common measure of central tendency

Mean = sum of values divided by the number of values
Affected by extreme values (outliers)
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
Mean = 3 Mean = 4
1 2 3 4 5 15 1 2 3 4 10 20
3 4
5 5 5 5
Median
In an ordered list, the median is the middle
number (50% above, 50% below)
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
Median = 3 Median = 3
Not affected by extreme values
Finding the Median
The location of the median:
n 1
Median position position in the ordered data
2
If the number of values is odd, the median is the middle number
If the number of values is even, the median is the average of
the two middle numbers
n 1
Note that is not the value of the median, only the
2
position of the median in the ranked data
Mode
A measure of central tendency
Value that occurs most often
Not affected by extreme values
Used for either numerical or categorical data
There may may be no mode
There may be several modes
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 0 1 2 3 4 5 6
No Mode
Mode = 9
Review Example
Five houses on a hill by the beach

$2,000 K
House Prices:
$2,000,000
500,000 $500 K
300,000 $300 K
100,000
100,000
$100 K
$100 K
Review Example:
Summary Statistics
House Prices:
Mean: ($3,000,000/5)
$2,000,000 = $600,000
500,000
300,000
100,000
100,000 Median: middle value of ranked data
Sum 3,000,000
= $300,000
Mode: most frequent value

= $100,000
Which measure of location
is the best?
Mean is generally used, unless

extreme values (outliers) exist
Then median is often used, since
the median is not sensitive to
extreme values.
Example: Median home prices may be
reported for a region less sensitive to
outliers
Shape of a Distribution
Describes how data are distributed

Measures of shape
Symmetric or skewed
Left-Skewed Symmetric Right-Skewed

Mean < Median Mean = Median Median < Mean
Measures of Variability
Variation
Range Interquartile Variance Standard Coefficient of

Range Deviation Variation
Measures of variation give

information on the spread
or variability of the data
values.
Same center,
different variation
Range
Simplest measure of variation

Difference between the largest and the smallest
observations:
Range = Xlargest Xsmallest
Example:
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Range = 14 - 1 = 13
Disadvantages of the Range
Ignores the way in which data are distributed
7 8 9 10 11 12 7 8 9 10 11 12
Range = 12 - 7 = 5 Range = 12 - 7 = 5
Sensitive to outliers
1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,5
Range = 5 - 1 = 4
1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,120
Range = 120 - 1 = 119
Interquartile Range
Can eliminate some outlier problems by using

the interquartile range
Eliminate high- and low-valued observations

and calculate the range of the middle 50% of
the data
Interquartile range = 3rd quartile 1st quartile

IQR = Q3 Q1
Interquartile Range
Example:
Median X
X Q1 Q3 maximum
minimum (Q2)
25% 25% 25% 25%
12 30 45 57 70
Interquartile range
= 57 30 = 27
Quartiles
Quartiles split the ranked data into 4 segments with
an equal number of values per segment
25% 25% 25% 25%
Q1 Q2 Q3
The first quartile, Q1, is the value for which 25% of the
observations are smaller and 75% are larger
Q2 is the same as the median (50% are smaller, 50% are
larger)
Only 25% of the observations are greater than the third
quartile
Quartile Formulas
Find a quartile by determining the value in the

appropriate position in the ranked data, where
First quartile position: Q1 = 0.25(n+1)
Second quartile position: Q2 = 0.50(n+1)

(the median position)
Third quartile position: Q3 = 0.75(n+1)
where n is the number of observed values
Quartiles
Example: Find the first quartile

Sample Ranked Data: 11 12 13 16 16 17 18 21 22
(n = 9)
Q1 = is in the 0.25(9+1) = 2.5 position of the ranked data
so use the value half way between the 2nd and 3rd values,
so Q1 = 12.5
Population Variance
Average of squared deviations of values from

the mean
N
Population variance:
(x )
i
2

2 i1
N -1
Where = population mean
N = population size
xi = ith value of the variable x
Sample Variance
Average (approximately) of squared deviations

of values from the mean
n
Sample variance:
(x x)
i
2
s
2 i1
n -1
Where X = arithmetic mean
n = sample size
Xi = ith value of the variable X
Population Standard Deviation
Most commonly used measure of variation
Shows variation about the mean
Has the same units as the original data
Population standard deviation:
i
(x ) 2
i 1
N -1
Sample Standard Deviation
Most commonly used measure of variation
Shows variation about the mean
Has the same units as the original data
Sample standard deviation: n
(x x)

2
i
S i1
n -1
Calculation Example:
Sample Standard Deviation
Sample
Data (xi) : 10 12 14 15 17 18 18 24
n=8 Mean = x = 16
(10 X)2 (12 x)2 (14 x)2 (24 x)2

s
n 1
(10 16)2 (12 16)2 (14 16)2 (24 16)2

8 1
126 A measure of the average

4.2426 scatter around the mean
7
Measuring variation
Small standard deviation
Large standard deviation
Weighted Mean
The weighted mean of a set of data is
w x i i
w 1x1 w 2 x 2 w n x n
x i1

w wi
Where wi is the weight of the ith observation
Use when data is already grouped into n classes, with

wi values in the ith class
Approximations for Grouped
Data
Suppose a data set contains values m1, m2, . . ., mk,
occurring with frequencies f1, f2, . . . fK
For a population of N observations the mean is

K
fimi K
where N fi
i1 i1
N
For a sample of n observations, the mean is
K
fm i i
K
where n fi
x i1
i1
n
Approximations for Grouped
Data
Suppose a data set contains values m1, m2, . . ., mk,
occurring with frequencies f1, f2, . . . fK
For a population of N observations the variance is

K
i i
f (m ) 2
2 i 1
N
For a sample of n observations, the variance is
K
i i
f (m x) 2
s2 i 1
n 1
The Sample Covariance
The covariance measures the strength of the linear relationship
between two variables
The population covariance:

N
(x i x )(y i y )
Cov (x , y) xy i1
N
The sample covariance:
n
(x x)(y y)
i i
Cov (x , y) s xy i1
n 1
Only concerned with the strength of the relationship
No causal effect is implied
Interpreting Covariance
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
Coefficient of Correlation
Measures the relative strength of the linear relationship
between two variables
Population correlation coefficient:

Cov (x , y)

XY
Sample correlation coefficient:
Cov (x , y)
r
sX sY
Features of
Correlation Coefficient, r
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 any positive linear
relationship
Scatter Plots of Data with Various
Correlation Coefficients
Y Y Y
X X X
r = -1 r = -.6 r=0
Y
Y Y
X X X
r = +1 r = +.3 r=0
Interpreting the Result
Scatter Plot of Test Scores
r = .733 100
95
There is a relatively
Test #2 Score
90

85
strong positive linear 80
relationship between 75
test score #1 70
70 75 80 85 90 95 100
Test #1 Score
and test score #2
Students who scored high on the first test tended

to score high on second test
Obtaining Linear Relationships
An equation can be fit to show the best linear

relationship between two variables:
Y = 0 + 1X
Where Y is the dependent variable and X is the

independent variable
Least Squares Regression
Estimates for coefficients 0 and 1 are found to
minimize the sum of the squared residuals
The least-squares regression line, based on sample
data, is
y b0 b1 x
Where b1 is the slope of the line and b0 is the y-
intercept:
Cov(x, y) sy
b1 2
r b0 y b1x
sx sx

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Statistics for

Business and Economics

Describing Data: Graphical

Data in raw form are usually not easy to use

The type of graph to use depends on the

Frequency distribution Line chart

Tabulating Data Graphing Data

Example: Hospital Patients by Unit

Cardiac Care 1,052

Bar charts and Pie charts are often used

Height of bar or size of pie slice shows the

Cardiac Care 1,052

A line chart (time-series plot) is used to show

Time is measured on the horizontal axis

The variable of interest is measured on the

Magazine Subscriptions by Year

What is a Frequency Distribution?

A frequency distribution is a way to

Each class grouping has the same width

Use at least 5 but no more than 15-20 intervals

Example: A manufacturer of insulation randomly

Sort raw data in ascending order:

Determine interval boundaries: 10 but less than 20, 20 but

Count observations & assign to classes

A graph of the data in a frequency distribution

Many (Narrow class intervals) 3.5

Can give a poor indication of how 1

Few (Wide class intervals) 12

can obscure important patterns of 2

10 but less than 20 3 15 3 15

A positively skewed distribution 12

(skewed to the right) has a tail that

Negatively Skewed Distribution

extends to the left in the direction of 8

Scatter Diagrams are used for paired

The Scatter Diagram:

axis and the other variable is measured

Volume Cost per

Cross Tables (or contingency tables) list the

If there are r categories for the first variable

4 x 3 Cross Table for Investment Choices by Investor

Side by side bar charts

Investor A Investor B Investor C

Describing Data: Numerical

Central Tendency Variation

Arithmetic Mean Range

Median Interquartile Range

Mean Median Mode

For a sample of size n:

The most common measure of central tendency

Not affected by extreme values

The location of the median:

Five houses on a hill by the beach

Mode: most frequent value

Mean is generally used, unless

Describes how data are distributed

Left-Skewed Symmetric Right-Skewed

Range Interquartile Variance Standard Coefficient of

Measures of variation give

Simplest measure of variation

Range = Xlargest Xsmallest

Can eliminate some outlier problems by using

Eliminate high- and low-valued observations