Session: 3

Descriptive Statistics: Numerical Measures

Session-4
 Measures of Location
 Measures of Variability

Describing Data

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Measures of Location Mean

 Mean  Perhaps the most important measure of location is

 Weighted Mean the mean.
If the measures are computed
Median  The mean provides a measure of central location.
 for data from a sample,
 Geometric Mean they are called sample statistics.  The mean of a data set is the average of all the data
values.
 Mode
If the measures are computed  The sample mean x is the point estimator of the
 Percentiles for data from a population, population mean m.
 Quartiles they are called population parameters.

A sample statistic is referred to

as the point estimator of the
corresponding population parameter.

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Sample Mean x Population Mean m

Sum of the values Sum of the values

of the n observations of the N observations

x i x i
x m
n N

Number of Number of
observations observations in
in the sample the population

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1
 Sample Mean Sample Mean

 Example: Apartment Rents  Example: Apartment Rents

Seventy efficiency apartments were randomly
x
x i

34, 356
 490.80
sampled in a small college town. The monthly rent n 70
prices for these apartments are listed below. 445 615 430 590 435 600 460 600 440 615
445 615 430 590 435 600 460 600 440 615 440 440 440 525 425 445 575 445 450 450
440 440 440 525 425 445 575 445 450 450 465 450 525 450 450 460 435 460 465 480
465 450 525 450 450 460 435 460 465 480 450 470 490 472 475 475 500 480 570 465
450 470 490 472 475 475 500 480 570 465 600 485 580 470 490 500 549 500 500 480
600 485 580 470 490 500 549 500 500 480 570 515 450 445 525 535 475 550 480 510
570 515 450 445 525 535 475 550 480 510 510 575 490 435 600 435 445 435 430 440
510 575 490 435 600 435 445 435 430 440

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Weighted Mean Weighted Mean

If data is from
 In some instances the mean is computed by giving a population,
each observation a weight that reflects its relative m replaces x. Numerator:
importance. sum of the weighted
data values
 The choice of weights depends on the application.
x
w x i i

w i
Denominator:
 In other weighted mean computations, quantities sum of the
such as pounds, dollars, or volume are frequently weights
used. where:
xi = value of observation i
wi = weight for observation i

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Example: Weighted Mean

Course Name Credits Grade Point
Organizational Behaviour and Management-I 3.0 A 9
Micro Economics for Managers 3.0 A+ 10
 Example: Construction Wages
DAM-I 3.0 A- 8 Ron Butler, a home builder, is looking over the
Financial Accounting and Reporting 3.0 B+ 7 expenses he incurred for a house he just built. For the
Marketing Management-I 3.0 B+ 7 purpose of pricing future projects, he would like to
Workshop on Reading and Thinking Skills 3.0 A 9 know the average wage ($/hour) he paid the workers
Communication Skills-I 3.0 A 9 he employed. Listed below are the categories of
Management and Productivity Tools 3.0 C+ 4 worker he employed, along with their respective wage
Comprehensive Viva-Voce 2.0 B+ 7 and total hours worked.
Qualifying Mathematics NC PASS -
Worker Wage ($/hr) Total Hours
Total 26
Carpenter 21.60 520
Electrician 28.72 230
Laborer 11.80 410
Painter 19.75 270
Plumber 24.16 160
GPA= [(9*3)+(10*3)+(8*3)+(7*3)+(7*3)+(9*3)+(9*3)+(4*3)+(7*2)]/26

=7.81

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2
 Weighted Mean Median

 Example: Construction Wages  The median of a data set is the value in the middle
when the data items are arranged in ascending order.
Worker xi wi wi x i
Carpenter 21.60 520 11232.0  Whenever a data set has extreme values, the median
Electrician 28.72 230 6605.6 is the preferred measure of central location.
Laborer 11.80 410 4838.0
Painter 19.75 270 5332.5  The median is the measure of location most often
Plumber 24.16 160 3865.6 reported for annual income and property value data.
1590 31873.7
 A few extremely large incomes or property values
can inflate the mean.
m  wi xi 
31873.7
 20.0464  $20.05
w i 1590

FYI, equally-weighted (simple) mean = $21.21

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Median Median

 For an odd number of observations:  For an even number of observations:

26 18 27 12 14 27 19 7 observations 26 18 27 12 14 27 30 19 8 observations

12 14 18 19 26 27 27 in ascending order 12 14 18 19 26 27 27 30 in ascending order

the median is the middle value. the median is the average of the middle two values.

Median = 19 Median = (19 + 26)/2 = 22.5

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Median Trimmed Mean

 Example: Apartment Rents  Another measure, sometimes used when extreme

Averaging the 35th and 36th data values: values are present, is the trimmed mean.
Median = (475 + 475)/2 = 475  It is obtained by deleting a percentage of the
smallest and largest values from a data set and then
425 430 430 435 435 435 435 435 440 440
computing the mean of the remaining values.
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465  For example, the 5% trimmed mean is obtained by
465 470 470 472 475 475 475 480 480 480 removing the smallest 5% and the largest 5% of the
480 485 490 490 490 500 500 500 500 510 data values and then computing the mean of the
510 515 525 525 525 535 549 550 570 570 remaining values.
575 575 580 590 600 600 600 600 615 615

Note: Data is in ascending order.

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3
 Geometric Mean Geometric Mean

 The geometric mean is calculated by finding the nth

root of the product of n values.
 It is often used in analyzing growth rates in
financial data (where using the arithmetic mean x g  n ( x1 )( x2 )( xn )
will provide misleading results). 1
 It should be applied anytime you want to determine  [( x1 )(x2 )( xn )] n

the mean rate of change over several successive

periods (be it years, quarters, weeks, . . .).
 Other common applications include: changes in
populations of species, crop yields, pollution levels,
and birth and death rates.

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Geometric Mean Pl note that, here 1

is
already
added

 Example: Avg. Rate of Return

Period Return (%) Growth Factor
1 -6.0 0.940
2 -8.0 0.920
3 -4.0 0.960
4 2.0 1.020
5 5.4 1.054

xg  5 (.94 )(.92 )(.96)(1.02 )(1.054 )

1
 [.89254 ] 5
 .97752
Average growth rate per period in %
is (.97752 - 1) (100) = -2.248%

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