Engineering Statistics

Descriptive Statistics – Numerical Method

 Learning objectives

§ To describe the properties of location or central

tendency, variation and shape in numerical data
§ To calculate descriptive summary measures for a
population
§ To construct and interpret a box-and-whisker plot
§ To describe the covariance and coefficient of
correlation

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 Definitions

§ The central tendency is the extent to which all the data

values group around a typical or central value.
§ The variation is the amount of dispersion, or scattering,
of values
§ The shape is the pattern of the distribution of values
from the lowest value to the highest value.

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 Course outline

§ Measures of location/central tendency

§ Measures of variation
§ Measures of distribution shapes, relative location and
detecting outliers
§ Exploratory data analysis
§ Measures of association between two variables
§ The weighted mean and working with grouped data

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 Measures of location/central tendency

§ Mean
§ Median
§ Mode
§ Percentiles
§ Quartiles

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 Measures of central tendency
the arithmetic mean
§ The mean of a data set is the average of all the data
values.
§ The mean provides a measure of central location for the
data.
§ If the data are for a sample, the mean is denoted by 𝑥̅
§ If the data are for a population, the mean is denoted by
the Greek letter µ.

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Measures of central tendency
the arithmetic mean

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 Measures of central tendency
the arithmetic mean

The arithmetic mean (mean) is the most common measure of

central tendency

For a sample of size n:

n

åX i
X1 + X2 + ! + Xn
X= i=1
=
n n
Sample size Observed values

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 Measures of central tendency
the arithmetic mean
§ 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
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Example: Apartment rents

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 Measures of central tendency
the median
§ The median is another measure of central location.
§ The median is the value in the middle when the data are arranged
in ascending order (smallest value to largest value).
§ The median is the measure of location most often reported for
annual income and property value data.
§ A few extremely large incomes or property values can inflate the
mean.
§ A sample median is notated by 𝑥# and population median is
notated by 𝜇#

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 Measures of central tendency
the median

§ In an ordered array, 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 = 4 Median = 4

§ Not affected by extreme values

n +1
§ Note that is NOT the value of the median,
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only the position of the median in the ranked data.
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Example: apartment rents

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 Measures of central tendency
the 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.

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 Measures of central tendency
the mode
§ Value that occurs most often
§ Not affected by extreme values
§ Used for either numerical or categorical data
§ There 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

Mode = 9 No Mode

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Example: apartment rents

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 Measures of central tendency
which measure to choose?
§ The mean is generally used, unless extreme values
(outliers) exist.
§ Then median is often used, since the median is not
sensitive to extreme values. For example, median
home prices may be reported for a region; it is less
sensitive to outliers.

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 Percentiles

§ A percentile provides information about how the data

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

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Percentiles

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Example: apartment rents

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 Quartiles
§ Quartiles are specific percentiles with each part containing
approximately one-fourth, or 25% observations
§ First Quartile = 25th Percentile
§ Second Quartile = 50th Percentile = Median
§ Third Quartile = 75th Percentile

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Example: apartment rents

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 Measures of central tendency
the geometric mean
§ Geometric mean
§ Used to measure the rate of change of a variable over time

X G = ( X1 ´ X 2 ´!´ X n ) 1/ n

§ Geometric mean rate of return

§ Measures the status of an investment over time

RG = [(1 + R1 ) ´ (1 + R 2 ) ´ ! ´ (1 + Rn )] 1/ n
-1
§ Where Ri is the rate of return in time period i

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 Measures of central tendency
the geometric mean

An investment of $100,000 declined to $50,000 at the end of

year one and rebounded to $100,000 at end of year two:

X1 = $100,000 X2 = $50,000 X3 = $100,000

50% decrease 100% increase

The overall two-year return is zero, since it started and ended

at the same level.
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 Measures of central tendency
the geometric mean
Use the 1-year returns to compute the arithmetic mean and the
geometric mean:

Arithmetic
(-.5) + (1)
mean rate X= = .25 Misleading result
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of return:

Geometric R G = [(1 + R1 ) ´ (1 + R2 ) ´ !´ (1 + Rn )]1/ n - 1

More
mean rate of = [(1 + (-.5)) ´ (1 + (1))]1/ 2 - 1 accurate
return: result
= [(.50) ´ (2)]1/ 2 - 1 = 11/ 2 - 1 = 0%

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 Measures of central tendency
summary
Central Tendency

Arithmetic Median Mode Geometric Mean

Mean
n

åX i
XG = ( X1 ´ X2 ´ ! ´ Xn )1/ n

X= i=1
n Middle value in Most
the ordered frequently
array observed
value

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 Measures of variation
§ It is often desirable to consider measures of variability
(dispersion), as well as measures of location.
§ 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.

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 Measures of variation

§ Range
§ Interquartile range
§ Variance
§ Standard deviation
§ Coefficient of variation

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 Range

§ The range of a data set is the difference between the largest and
smallest data values.
§ It is the simplest measure of variation.
§ It is very sensitive to the smallest and largest data values.

Range = Xlargest – Xsmallest

Example:

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Range = 13 - 1 = 12
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Example: apartment rents

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 Measures of variation
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
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 Interquartile range
§ Problems caused by outliers can be eliminated by using the
interquartile range.
§ The IQR can eliminate some high and low values and calculate the
range from the remaining values.
§ Interquartile range = 3rd quartile – 1st quartile
= Q3 – Q1
Example:
Median X
X Q1 (Q2) Q3 maximum
minimum
25% 25% 25% 25%

12 30 45 57 70

Interquartile range
= 57 – 30 = 27 32
Example: apartment rents

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 Measures of variation
standard deviation
§ 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 (x for a sample, µ for a
population).

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Measures of variation
standard deviation

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Measures of variation
standard deviation

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Example – mean class

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Example – starting salary

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Measures of variation
standard deviation

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Example – starting salary

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 Measures of variation
comparing standard deviation

Data A
Mean = 15.5
11 12 13 14 15 16 17 18 19 20 21 S = 3.338

Data B Mean = 15.5

11 12 13 14 15 16 17 18 19 20 21 S = 0.926

Data C Mean = 15.5

S = 4.570
11 12 13 14 15 16 17 18 19 20 21

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 Measures of variation
comparing standard deviation

Small standard deviation

Large standard deviation

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 Measures of variation
summary characteristics
§ The more the data are spread out, the greater the range,
interquartile range, variance, and standard deviation.
§ The more the data are concentrated, the smaller the
range, interquartile range, variance, and standard
deviation.
§ If the values are all the same (no variation), all these
measures will be zero.
§ None of these measures are ever negative.

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Coefficient of variation

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Example – mean class

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 Measures of distribution shape, relative location
and detecting outliers

§ Distribution Shape
§ z-Scores
§ Chebyshev’s Theorem
§ Empirical Rule
§ Detecting Outliers

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 Shape of distribution
§ Describes how data are distributed
§ Measures of shape
§ Symmetric or skewed

Left-Skewed Symmetric Right-Skewed

Mean < Median Mean = Median Median < Mean

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 Shape of distribution

Mean < Median Median < Mean

Mean = Median Median < Mean

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General descriptive statistics using
Microsoft Excel

1. Select Tools.

2. Select Data Analysis.

3. Select Descriptive
Statistics and click OK.

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 General descriptive statistics using
Microsoft Excel

4. Enter the cell

range.
5. Check the
Summary
Statistics box.
6. Click OK

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z-scores

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Example – mean class

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Chebyshev’s theorem

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Example - Chebyshev’s theorem

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 Example - Chebyshev’s theorem

For the test scores between 58 and 82:

%&'()
q = −2.4, indicates 58 is 2.4 standard deviations below the mean.
%
&/'()
q = 2.4, indicates 82 is 2.4 standard deviations above the mean.
%

Applying Chebyshev theorem with z=2.4, we have:

1 1
1− / = 1− /
= 0.826
𝑧 (2.4)
At least 82.6% of the students must have test scores between
58 and 82
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Empirical rule

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Empirical rule

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Empirical rule

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Empirical rule

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 Example – apartment rents

𝑥̅ = 490.8
𝑠 = 54.74

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 Example – apartment rents

𝑥̅ = 490.8
𝑠 = 54.74

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 Example – apartment rents

𝑥̅ = 490.8
𝑠 = 54.74

615 615
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 Detecting outliers

§ Sometimes a data set will have one or more

observations with unusually large or unusually small
values.
§ These extreme values are called outliers.
§ Experienced statisticians take steps to identify outliers
and then review each one carefully.
§ An outlier may be a data value that has been
incorrectly recorded. à If so, it can be corrected
before further analysis.

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 Detecting outliers

§ An outlier may also be from an observation that was

incorrectly included in the data set. à if so, it can be
removed.
§ An outlier may be an unusual data value that has been
recorded correctly and belongs in the data set. à
should remain
§ Standardized values (z-scores) can be used to identify
outliers.
§ In using z-scores to identify outliers, we recommend
treating any data value with a z-score less than -3 or
greater than 3 as an outlier.

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Example – detecting outliers

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Example: apartment rents

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 Exploratory data analysis

§ Five-Number Summary
1. Minimum/smallest value
2. First quartile (Q1)
3. Median (Q2)
4. Third quartile (Q3)
5. Maximum/largest value
§ Box-and-Whisker Plot

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 Five-number summary

Max. value
§ Five-Number Summary
1. Minimum/smallest value
2. First quartile (Q1)
3. Median (Q2)
4. Third quartile (Q3)
5. Maximum/largest value
§ Box-and-Whisker Plot 68
 Box-and-whisker plot

§ A box plot is a graphical summary of data that is based on a

five-number summary.
§ A key to the development of a box plot is the computation
of the median and the quartiles, Q1 and Q3. The
interquartile range, IQR Q3 Q1, is also used.
o A box is drawn with the ends of the box located at the first and
third quartiles. For the salary data,Q1 =3465 and Q3= 3600. This
box contains the middle 50%of the data.
o A vertical line is drawn in the box at the location of the median
(3505 for the salary data).
o By using the interquartile range, IQR = Q3-Q1 limits are
located. The limits for the box plot are 1.5(IQR) below Q1 and
1.5(IQR) above Q3.
o The dashed lines called whiskers. The whiskers are drawn from
the ends of the box to the smallest and largest value inside limits.
o Finally, locate each outlier and drawn using asterisk symbol (*)69
Box plot

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 Measures of association between two
variables
§ Covariance
§ Correlation coefficient

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Covariance

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Example - stereo and sound equipment
store

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 Scatter diagram and calculation of sample
covariance for the stereo and sound equipment store

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Correlation coefficient

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 The correlation coefficient

Y Y Y

X X X
r = -1 r = -.6 r=0

Y Y

X X
r = +1 r = +.3
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Correlation coefficient

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Example - stereo and sound equipment store

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Perfect linear relationship

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The correlation coefficient
using Microsoft Excel

1. Select Tools/Data Analysis

2. Choose Correlation from
the selection menu
3. Click OK . . .

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 The correlation coefficient
using Microsoft Excel

3. Input data range and select

appropriate options
4. Click OK to get output

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 The correlation coefficient
using Microsoft Excel

§ r = .733 Scatter Plot of Test Scores

100

§ There is a relatively 95

strong positive linear

Test #2 Score
90

relationship between test 85

score #1 and test score 80

#2. 75

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70 75 80 85 90 95 100

Test #1 Score
§ Students who scored high
on the first test tended to
score high on second test.

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 The weighted mean and
working with grouped data
§ Weighted mean
§ Mean for grouped data
§ Variance for grouped data
§ Standard deviation for grouped data

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Weighted mean

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Example

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 Grouped data

§ The weighted mean computation can be used to obtain

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

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Mean and sample variance for grouped
data

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Example

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Example

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 References

§ Statistics for Business and Economics, Anderson,

Sweeney, and Williams, West Publishing Company.
§ Statistics for Business and Economics.,
SouthWestern/Thompson Learning
§ Statistics for Managers Using Microsoft Excel, 5e ©
2008 Pearson Prentice-Hall, Inc.

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