02 QuantTech Mean Variance

Quantitative Methods
Varsha Varde
Course Coverage
Essential Basics for Business Executives

Data Classification & Presentation Tools
Preliminary Analysis & Interpretation of Data
Correlation Model
Regression Model
Time Series Model
Forecasting
Uncertainty and Probability
Sampling Techniques
Estimation and Testing of Hypothesis
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Quantitative Methods
Preliminary Analysis of Data

Central Tendency of the Data at Hand:
Need to Size Up the Data At A Glance
Find A Single Number to Summarize the
Huge Mass of Data Meaningfully: Average
Tools: Mode
Median
Arithmetic Mean
Weighted Average
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Mode, Median, and Mean

Mode: Most Frequently Occurring Score
Median: That Value of the Variable Above
Which Exactly Half of the Observations Lie
Arithmetic Mean: Ratio of Sum of the
Values of A Variable to the Total Number
of Values
Mode by Mere Observation, Median needs
Counting, Mean requires Computation
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Example: Number of Sales Orders

Booked by 50 Sales Execs April 2006
0, 0, 0, 0, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4, 5, 5, 5,
6, 6, 6, 6, 7, 7, 7, 8, 8, 8, 8, 9, 9, 9, 9, 9,
10, 10, 11, 11, 11, 12, 14, 15, 16, 17, 19,
21, 24, 28, 30, 34, 43
Mode: 9 (Occurs 5 Times) Orders
Median: 8 (24 Obs. Above & 24 Below)
Total Number of Sales Orders: 491
Total Number of Sales Execs : 50
Arithmetic Mean: 491 / 50 = 9.82 Orders
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This Group
This Group of Participants:
Mode of age is
years
Median is
years,
Arithmetic Mean is
years
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Arithmetic Mean - Example

Product
Return on Investment (%)
10
30
20
Total
65
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Arithmetic Mean - Example

Arithmetic Mean: 65 / 4 = 16.25 %
Query: But, Are All Products of Equal
Importance to the Company?
For Instance, What Are the Sales Volumes
of Each Product? Are They Identical?
If Not, Arithmetic Mean Can Mislead.
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Weighted Average - Example

Product
RoI
Sales (Mn Rs) Weight RoI x W
10
400
0.20
2.00
30
200
0.10
3.00
900
0.45
2.25
20
500
0.25
5.00
Total
65
2000
1.00
12.25
Wt. Av.
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A Comparison
Mode: Easiest, At A Glance, Crude
Median: Disregards Magnitude of Obs.,
Only Counts Number of Observations
Arithmetic Mean: Outliers Vitiate It.
Weighted Av. Useful for Averaging Ratios
Symmetrical Distn: Mode=Median=Mean
+ly Skewed Distribution: Mode < Mean
-ly Skewed Distribution: Mode > Mean
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Measure of Dispersion in the Data:
Average is Insufficient to Summarize
Huge Data Spread over a Wide Range
Need to Obtain another Number to Know
How Widely the Numbers are Spread
Tools: Range & Mean Deviation
Variance & Standard Deviation
Coefficient of Variation
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Range and Mean Deviation

Range: Difference Between the Smallest
and the Largest Observation
Mean Deviation: Arithmetic Mean of the
Deviations of the Observations from an
Average, Usually the Mean.
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Computing Mean Deviation

Select a Measure of Average, say, Mean.
Compute the Difference Between Each
Value of the Variable and the Mean.
Multiply the Difference by the Concerned
Frequency.
Sum Up the Products.
Divide by the Sum of All Frequencies.
Mean Deviation is the Weighted Average.
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Mean Deviation - Example

Orders: SEs
|Orders-Mean|
|Orders-Mean| x SEs
00: 04
9.82
9.82x4=39.28
01: 01
8.82
8.82x1=8.82
02: 03
7.82
7.82x3=23.46
03: 03
6.82
6.82x3=20.46
04: 03
5.82
5.82x3=17.46
05: 03
4.82
4.82x3=14.46
06: 04
3.82
3.82x4=15.28
07: 03
2.82
2.82x3=8.46
08: 04
1.82
1.82x4=7.28
09:05
0.82
0.82x5=4.10
10: 02
0.18
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0.18x2=0.36
15

Orders: SEs
|Orders-Mean|
|Orders-Mean| x SEs
11: 03
1.18
1.18x3=3.54
12: 01
2.18
2.18x1=2.18
13: 00
3.18
3.18x0=0
14: 01
4.18
4.18x1=4.18
15: 01
5.18
5.18x1=5.18
16: 01
6.18
6.18x1=6.18
17: 01
7.18
7.18x1=7.18
18: 00
8.18
8.18x0=0
19: 01
9.18
9.18x1=9.18
20:00
10.18
10.18x0=0
21: 01
11.18
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11.18x1=11.18
16

Orders: SEs
|Orders-Mean|
|Orders-Mean| x SEs
22: 00
12.18
12.18x0=0
23: 00
13.18
13.18x0=0
24: 01
14.18
14.18x1=14.18
25: 00
15.18
15.18x0=0
26: 00
16.18
16.18x0=0
27: 00
17.18
17.18x0=0
28: 01
18.18
18.18x1=18.18
29: 00
19.18
19.18x0=0
30: 01
20.18
20.18x1=20.18
31: 00
21.18
21.18x0=0
32: 00
22.18
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22.18x0=0
17

Orders: SEs
|Orders-Mean|
|Orders-Mean| x SEs
33: 00
23.18
23.18x0=0
34: 01
24.18
24.18x1=24.18
35: 00
25.18
25.18x0=0
36: 00
26.18
26.18x0=0
37: 00
27.18
27.18x0=0
38: 00
28.18
28.18x0=0
39: 00
29.18
29.18x0=0
40: 00
30.18
30.18x0=0
41: 00
31.18
31.18x0=0
42: 00
32.18
32.18x0=0
43: 01
33.18
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33.18x1=33.18
18
Mean Deviation
Sum of the Products: 318.12

Sum of All Frequencies: 50
Mean Deviation: 318.12 / 50 = 6.36
Let Us Compute With a Simpler Example
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Machine Downtime Data in Minutes

per Day for 100 Working Days
Frequency Distribution
Downtime in Minutes
No. of Days
00 10
20
10 20
40
20 30
20
30 40
10
40 50
10
Total
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100
20

Downtime Midpoints
No. of Days
05
20
15
40
25
20
35
10
45
10
Total
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100
21
Arithmetic Mean
Downtime
Midpoints
05
No. of Days
20
05 x 20 = 100
15
40
15 x 40 = 600
25
20
25 x 20 = 500
35
10
35 x 10 = 350
45
10
45 x 10 = 450
Total
100
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Product
2000
22
Arithmetic Mean
Arithmetic Mean is the Average of the
Observed Downtimes.
Arithmetic Mean= Total Observed
Downtime/ total number of days
Arithmetic Mean= 2000 / 100 = 20 Minutes
Average Machine Downtime is 20 Minutes.
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Mean Deviation
Downtime
Midpoints
05
No. of Days
20
Deviation from
Mean
|05 20| =15
15
40
|15 20| = 05
25
20
|25 20| = 05
35
10
|35 20| = 15
45
10
|45 20| = 25
Total
100
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Mean Deviation
Downtime
Midpoints
05
No. of
Days
20
Deviation from
Products
Mean
|05 20| =15 15 x 20 = 300
15
40
|15 20| = 05
05 x 40 = 200
25
20
|25 20| = 05
05 x 20 = 100
35
10
|35 20| = 15
15 x 10 = 150
45
10
|45 20| = 25
25 x 10 = 250
Total
100
1000
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Mean Deviation
Definition: Mean Deviation is mean of
Deviations (Disregard negative Sign) of
the Observed Values from the Average.
In this Example, Mean Deviation is the
Weighted Average(weights as
frequencies) of the Deviations of the
Observed Downtimes from the Average
Downtime.
Mean Deviation = 1000 / 100 = 10 Minutes
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Variance
Definition: Variance is the average of the
Squares of the Deviations of the Observed
Values from the mean.
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Standard Deviation
Definition: Standard Deviation is the
Average Amount by which the Values
Differ from the Mean, Ignoring the Sign of
Difference.
Formula: Positive Square Root of the
Variance.
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Variance
Downtime
Midpoints
No. of
Days
Difference from
Mean
Square
Products
05
20
05 20 = -15
225
225 x 20 =
4500
15
40
15 20 = - 05
25
25 x 40 =
1000
25
20
25 20 = 05
25
25 x 20 =
500
35
10
35 20 = 15
225
225 x 10 =
2250
45
10
45 20 = 25
625
625 x 10 =
6250
Total
100
14500
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Variance & Standard Deviation

Variance = 14500 / 100 = 145 Mts Square
Standard Deviation =
Sq. Root of 145 = 12.04 Minutes
Exercise: This Group of 65: Compute the
Variance & Standard Deviation of age
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Simpler Formula for Variance

Logical Definition: Variance is the
Average of the Squares of the Deviations
of the Observed Values from the mean.
Simpler Formula: Variance is the Mean
of the Squares of Values Minus the
Square of the Mean of Values..
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Variance (by Simpler Formula)

Downtime
Midpoints
No. of Days
Squares
Products
05
20
25
25 x 20 = 500
15
40
225
225 x 40 = 9000
25
20
625
625 x 20 = 12500
35
10
1225
1225 x 10 = 12250
45
10
2025
2025 x 10 = 20250
Total
100
54500
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Variance (by Simpler Formula)

Mean of the Squares of Values
= 54500/100 = 545
Square of the Mean of Values=20x20=400
Variance = Mean of Squares of Values
Minus Square of Mean of Values
= 545 400 = 145
Standard Deviation = Sq.Root 145 = 12.04
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Significance of Std. Deviation

In a Normal Frequency Distribution
68 % of Values Lie in the Span of Mean
Plus / Minus One Standard Deviation.
Plus / Minus Two Standard Deviation.
Plus / Minus Three Standard Deviation.
Roughly Valid for Marginally Skewed Distns.
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Downtime in Minutes
No. of Days
00 10
20
10 20
40
20 30
20
30 40
10
40 50
10
Total
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100
35
Interpretation from Mean & Std Dev

Machine Downtime Data
Mean = 20 and Standard Deviation = 12
Span of One Std. Dev. = 2012 to 20+12
= 8 to 32: 60% Values
Span of Two Std. Dev. = 2024 to 20+24
= -4 to 44: 95% Values
Span of Three Std. Dev. = 2036 to 20+36
= -16 to 56: 100% Values
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Earlier Example
Orders: SEs
Orders: SEs
Orders: SEs
Orders: SEs
00: 04
11: 03
22: 00
33: 00
01: 01
12: 01
23: 00
34: 01
02: 03
13: 00
24: 01
35: 00
03: 03
14: 01
25: 00
36: 00
04: 03
15: 01
26: 00
37: 00
05: 03
16: 01
27: 00
38: 00
06: 04
17: 01
28: 01
39: 00
07: 03
18: 00
29: 00
40: 00
08: 04
19: 01
30: 01
41: 00
09: 05
20: 00
31: 00
42: 00
10: 02
21: 01
32: 00
43: 01
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Interpretation from Mean & Std Dev

Sales Orders Data
Mean = 9.82 & Standard Deviation = 6.36
Round Off To: Mean 10 and Std. Dev 6
Span of One Std. Dev. = 106 to 10+6 = 4
to 16: 31 Values (62%)
Span of Two Std. Dev. = 1012 to 10+12
= -2 to 22: 45 Values (90%)
Span of Three Std. Dev. = 1018 to 10+18
= -8 to 28: 47 Values (94%)
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BIENAYME_CHEBYSHEV RULE
For any distribution percentage of
observations lying within +/- k standard
deviation of the mean is at least
( 1- 1/k square ) x100 for k>1
For k=2, at least (1-1/4)100 =75% of
observations are contained within 2
standard deviations of the mean
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Std. Deviation and Dispersion have Units
of Measurement.
To Compare Dispersion in Many Sets of
Data (Absenteeism, Production, Profit),
We Must Eliminate Unit of Measurement.
Otherwise its Apple vs. Orange vs. Mango
Coefficient of Variation is the Ratio of
Standard Deviation to Arithmetic Mean.
CoV is Free of Unit of Measurement.
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In Our Machine Downtime Example,
Coefficient of Variation is 12.04 / 20 = 0.6
or 60%
In Our Sales Orders Example, Coefficient
of Variation is 6.36 / 9.82 = 0.65 or 65%
The series for which CV is greater is said
to be more variable or less consistent ,
less uniform, less stable or less
homogeneous.
In Our Machine Downtime Example,
Coefficient of Variation is 12.04 / 20 = 0.6
In Our Sales Orders Example, Coefficient
of Variation is 6.36 / 9.82 = 0.65
The series for which CV is greater is said
to be more variable or less consistent ,
less uniform, less stable or less
homogeneous.
Example
Mean and SD of dividends on equity stocks of
TOMCO & Tinplate for the past six years is as
follows
Tomco:Mean=15.42%,SD=4.01%
Tinplate:Mean=13.83%, SD=3.19%
CV:Tomco=26.01%,Tinplate=23.01%
Since CV of dividend of Tinplates is less it
implies that return on stocks of Tinplate is more
stable
For investor seeking stable returns it is better to
invest in scrips of Tinplate
Exercise
List Ratios Commonly used in Cricket.
Study Individual Scores of Indian Batsmen
at the Last One Day Cricket Match.
Are they Nominal, Ordinal or Cardinal
Numbers? Discrete or Continuous?
Find Median & Arithmetic Mean.
Compute Range, Mean Deviation,
Variance, Standard Deviation & CoV. ..
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Steps in Constructing a
(Histogram)
1. Determine the number of classes
2. Determine the class width
3. Locate class boundaries
4. Use Tally Marks for Obtaining
Frequencies for each class
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Rule of thumb
Not too few to lose information content
and not too many to lose pattern
The number of classes chosen is usually
between 6 and15.
Subject to above the number of classes
may be equal to the square root of the
number of data points.
The more data one has the larger is the
number of classes.
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Rule of thumb
Every item of data should be included in
one and only one class
Adjacent classes should not have interval
in between
Classes should not overlap
Class intervals should be of the same
width to the extent possible
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Illustration
Frequency and relative frequency distributions
(Histograms):
Example
Weight Loss Data
20.5 19.5 15.6 24.1 9.9
15.4 12.7 5.4 17.0 28.6
16.9 7.8 23.3 11.8 18.4
13.4 14.3 19.2 9.2 16.8
8.8 22.1 20.8 12.6 15.9
Objective: Provide a useful summary of the available
information
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Illustration
Method: Construct a statistical graph called a histogram (or frequency distribution)

Weight Loss Data
class boundaries - tally class
rel
.
freq, f
freq, f/n
1 5.0-9.0
3
2 9.0-13.0
5
3 13.0-17.0
7
4 17.0-21.0
6
5 21.0-25.0
3
6 25.0-29.0
1
Totals
25
Let
k = # of classes
max = largest measurement
min = smallest measurement
n = sample size
w = class width
3/25 (.12)
5/25 (.20)
7/25 (.28)
6/25 (.24)
3/25 (.12)
1/25 (.04)
1.00
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Formulas
k = Square Root of n
w =(max min)/k
Square Root of 25 = 5. But we used k=6
w = (28.65.4)/6
w = 4.0
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Numerical methods
Measures of Central Tendency
1. Mean( Arithmetic,Geometric,Harmonic)
2 .Median
3. Mode
Measures of Dispersion (Variability)
1. Range
2. Mean Absolute Deviation (MAD)
3. Variance
4. Standard Deviation
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Given a sample of measurements (x1, x2, , xn)
where
n = sample size
xi = value of the ith observation in the sample
1. Arithmetic Mean
AM of x =( x1+x2++xn) / n = xi /n
2. Geometric Mean
GM of x =(x1.x2.x3..xn) ^1/n
3.Weighted Average =
(w1.x1+w2.x2+.wn.xn)/(w1+w2+wn)
=wixi /wi
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Example
: Given a sample of 5 test grades
(90, 95, 80, 60, 75)
Then n=5; x1=90,x2=95,x3=80,x4=60,x5=75
AM of x =( 90 + 95 + 80 + 60 + 75)/5 = 400/5=80
GM of x =( 90 *95* 80 * 60 * 75)^1/5
=(3078000000)^1/5=79
Weighted verage;w1=1,w2=2,w3=2,w4=3,w5=2
WM of x =( 1*90 + 2*95 + 2*80 +3* 60 +2*75)/10
= 770/10=77
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Sample Median
The median of a sample (data set) is the middle number when the measurements are
arranged in ascending order.
Note:
If n is odd, the median is the middle number
If n is even, the median is the average of the middle two numbers.
Example 1: Sample (9, 2, 7, 11, 14), n = 5
Step 1: arrange in ascending order
2, 7, 9, 11, 14
Step 2: med = 9.
Example 2: Sample (9, 2, 7, 11, 6, 14), n = 6
Step 1: 2, 6, 7, 9, 11, 14
Step 2: med = (7+9)/2=8

Remarks:
(i) AM of x is sensitive to extreme values
(ii) the median is insensitive to extreme values (because median is a measure of
location or position).
3. Mode
The mode is the value of x (observation) that occurs with the greatest frequency.
Example: Sample: (9, 2, 7, 11, 14, 7, 2, 7), mode = 7
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Choosing Appropriate
Measure of Location
If data are symmetric, the mean, median,
and mode will be approximately the same.
If data are multimodal, report the mean,
median and/or mode for each subgroup.
If data are skewed, report the median.
The AM is the most commonly used and is
preferred unless precluding circumstances
are present
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Measures of Variation
Sample range
Sample variance
Sample standard deviation
Sample interquartile range
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Sample Range
R = largest obs. - smallest obs.
or, equivalently
R = xmax - xmin
Coefficient of Range
CR = largest obs. - smallest obs.
-------------- ---------------------------largest obs. +smallest obs.
or, equivalently
CR = xmax xmin/ xmax + xmin
Sample Variance
n
s
2
i 1
n 1
Sample Standard Deviation

n
s s
2
i 1
n 1
What is a standard deviation?

it is the typical (standard) difference
(deviation) of an observation from the
mean
think of it as the average distance a data
point is from the mean, although this is not
strictly true
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Sample Interquartile Range

IQR = third quartile - first quartile
or, equivalently
IQR = Q3 - Q1
Quartile Deviation
Q.D =( third quartile - first quartile)/2
= (Q3 - Q1)/2
(Median -Q.D) to( Median+Q.D)
covers around 50% of the observations
as economic or business data are
seldom perfectly symmetrical
Coefficient of Quartile deviation

=( Q3 - Q1)/ Q3 + Q1
Measures of Variation Some Comments

Range is the simplest, but is very sensitive
to outliers
Interquartile range is mainly used with
skewed data (or data with outliers)
We will use the standard deviation as a
measure of variation often in this course
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Measures of Variability
Given: a sample of size n

sample: (x1, x2, , xn)
1. Range:
Range = largest measurement - smallest
measurement
or Range = max - min
Example 1: Sample (90, 85, 65, 75, 70, 95)
Range = max - min = 95-65 = 30
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2. Mean Absolute Deviation
MAD = AM of absolute Deviations

Sum of
|xi x| /n =I xi- x I /n
Example 2: Same sample
Totals
x
90
85
65
7
70
95
480
x x
10
5
-15
-5
-10
15
0
|x x|
10
560
15
5
10
15
60
MAD =60/10=6
Remarks:
(i) MAD is a good measure of variability
(ii) It is difficult for mathematical manipulations
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3. Standard Deviation
Example: Same sample as before (AM of ;x = 80) ;n=6
x
90
85
65
75
70
95
Totals 480
Therefore
Variance of x =700 / 5 =140
x x
10
5
-15
-5
-10
15
0
(x x)2
100
25
225
25
100
225
700
Standard deviation of x = square root of 140 = 11.83
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Finite Populations
Let N = population size.
Data: {x1, x2, , xN}
Population mean: = (x1+x2++xN) /N

Population variance: 2 = (x1 )2+ (x2 )2+.+ (xN )2
-------------------------------------------------------------------
N
Population standard deviation: = 2,
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Population parameters vs sample

statistics.
Sample statistics: x, s2, s.
Population parameters: , 2, .
Approximation: s = range /4
Coefficient of variation (c.v.) = s / x
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4 Percentiles
Using percentiles is useful if data is badly
skewed.
Let x1, x2, . . . , xn be a set of measurements
arranged in increasing order.
Definition. Let 0 < p < 100. The pth percentile is
a number x such that p% of all measurements
fall below the pth percentile and (100 p)% fall
above it.
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Example. Data: 2, 5, 8, 10, 11, 14, 17, 20.

(i) Find the 30th percentile.
Solution.
(1)position = .3(n + 1) = .3(9) = 2.7
(2)30th percentile = 5 + .7(8 5)
= 5 + 2.1 = 7.1
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Special Cases.
1. Lower Quartile (25th percentile)
Example.
(1) position = .25(n + 1) = .25(9) = 2.25
(2) Q1 = 5+.25(8 5) = 5 + .75 = 5.75
2. Median (50th percentile)
Example.
(1) position = .5(n + 1) = .5(9) = 4.5
(2) median: Q2 = 10+.5(11 10) = 10.5
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3. Upper Quartile (75th percentile)

Example.
(1) position = .75(n + 1) = .75(9) = 6.75
(2) Q3 = 14+.75(17 14) = 16.25
Interquartiles.
IQ = Q3 Q1
Exercise. Find the interquartile (IQ) in the above
example.
16.25-5.75=10.5
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Sample Mean and Variance

For Grouped Data
5 Example: (weight loss data)

Weight Loss Data
class boundaries mid-pt. freq.
x
f
1
5.0-9.07
3
2
9.0-13.011
5
3
13.0-17.0- 15
7
4
17.0-21.0- 19
6
5
21.0-25.0- 23
3
6
25.0-29.0
27
1
Totals
25
391 6,809
Let k = number of classes.
Formulas.
AM= (x1f1+x2f2+..+xkfk)/(f1+f2++fk)=391/25=15.64
Variance= 6809/24-(15.64)^2=283,71-244.61=39
SD=(39)^1/2=6.24
xf
x2f
21 147
55
605
105 1,575
114 2,166
69 1,587
27
729
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mode for grouped data
f f1
Mode=Lmo + ---------- x w
2f-f1-f2
Lmo= Lower limit of Modal Class
f1,f2=Frequencies of classes preceding
and succeeding modal class
f=Frequency of modal class
w= Width of class interval
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Lmo=13
f1=5
f2=6
f=7
w=4
Mode=13+{(7-5)/(14-5-6)}X4=13+8/3
=15.67
varsha Varde
76
Formulas for Quartiles

[ (N+1)/4-(F+1)]
Q1=Lq + ------------xW
fq
Where, Lq=Lower limit of quartile class
N= Total frequency
F=Cumulative frequency upto quartile class
fq= frequency of quartile class
w= Width of the class interval
First quartile class is that which includes observation no,
(N+1)/4
varsha Varde
77

[ (N+1)/4-(F+1)]
Q1=Lq + ------------xW
fq
Where, Lq=Lower limit of quartile class=9
N= Total frequency=25
F=Cumulative frequency upto quartile class=3
fq= frequency of quartile class=5
w= Width of the class interval=4
First quartile class is that which includes observation no,
(N+1)/4=6.5
Q1=9+[{(6.5 -4)/5 }x 4]=9+2=11
varsha Varde
78
[ 3(N+1)/4-(F+1)]
Q3=Lq + --------------------xW
fq
N= Total frequency
Third quartile class is that which includes observation
no.3(N+1)/4
varsha Varde
79
[ 3(N+1)/4-(F+1)]
Q3=Lq + --------------------xW
fq
Third quartile class is that which includes observation
no.3(N+1)/4=19.5
Q3=17 +[ {(19.5-16)/6}x4]=17+2.33=19.33
varsha Varde
80
[ 2(N+1)/4-(F+1)]
Q2=Lq + ------------------ xW
fq
N= Total frequency
Second quartile class is that which includes observation
no.(N+1)/2
varsha Varde
81
[ 2(N+1)/4-(F+1)]
Q2=Lq + ------------------ xW
fq
Second quartile class is that which includes observation
no.(N+1)/2=13
Q2=13 +[{(13-9)/7}x4]=13+5.14=18.14
varsha Varde
82
Empirical mode
Where mode is ill defined its value may be
ascertained by using the following formula
Mode =3 median-2mean
varsha Varde
83

02 QuantTech Mean Variance

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02 QuantTech Mean Variance

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Quantitative Methods

Essential Basics for Business Executives

Preliminary Analysis of Data

Mode, Median, and Mean

Example: Number of Sales Orders

Arithmetic Mean - Example

Return on Investment (%)

Arithmetic Mean - Example

Weighted Average - Example

Sales (Mn Rs) Weight RoI x W

Preliminary Analysis of Data

Range and Mean Deviation

Computing Mean Deviation

Mean Deviation - Example

Mean Deviation - Example

Mean Deviation - Example

Mean Deviation - Example

Sum of the Products: 318.12

Machine Downtime Data in Minutes

Machine Downtime Data in Minutes

Variance & Standard Deviation

Simpler Formula for Variance

Variance (by Simpler Formula)

Variance (by Simpler Formula)

Significance of Std. Deviation

Machine Downtime Data in Minutes

Interpretation from Mean & Std Dev

Interpretation from Mean & Std Dev

Method: Construct a statistical graph called a histogram (or frequency distribution)

Measures of Central Tendency

Measures of Central Tendency

Example 1: Sample (9, 2, 7, 11, 14), n = 5

Step 1: arrange in ascending order

Example 2: Sample (9, 2, 7, 11, 6, 14), n = 6

Step 2: med = (7+9)/2=8

(i) AM of x is sensitive to extreme values

(ii) the median is insensitive to extreme values (because median is a measure of

Example: Sample: (9, 2, 7, 11, 14, 7, 2, 7), mode = 7

Sample Standard Deviation

What is a standard deviation?

Sample Interquartile Range

Coefficient of Quartile deviation

Measures of Variation Some Comments

Given: a sample of size n

2. Mean Absolute Deviation

MAD = AM of absolute Deviations

Standard deviation of x = square root of 140 = 11.83

Population mean: = (x1+x2++xN) /N

Population parameters vs sample

Example. Data: 2, 5, 8, 10, 11, 14, 17, 20.

3. Upper Quartile (75th percentile)

Sample Mean and Variance

5 Example: (weight loss data)

mode for grouped data

Formulas for Quartiles

Formulas for Quartiles

Formulas for Quartiles

Formulas for Quartiles

Formulas for Quartiles

Formulas for Quartiles

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