Descriptive Statistics

Chapter 2

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Types of Data
Population and Sample Data
Quantitative and Categorical Data
Cross-Sectional and Time Series Data
Sources of Data

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Types of Data
• Population: All elements of interest
• Sample: Subset of the population
• Random sampling: A sampling method to gather a representative sample of
the population data
• Quantitative data: Data on which numeric and arithmetic
operations, such as addition, subtraction, multiplication, and division,
can be performed
• Categorical data: Data on which arithmetic operations cannot be
performed

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Types of Data
• Cross-sectional data: Data collected from several entities at the
same, or approximately the same, point in time
• Time series data: Data collected over several time periods
• Graphs of time series data are frequently found in business and economic
publications
• Graphs help analysts understand what happened in the past, identify trends
over time, and project future levels for the time series

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4
Data for Dow Jones Industrial Index Companies

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5
Dow Jones Index Values Since 2005

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Types of Data
Sources of Data
• Experimental study
• A variable of interest is first identified
• Then one or more other variables are identified and controlled or manipulated so that
data can be obtained about how they influence the variable of interest

• Nonexperimental study or observational study

• Make no attempt to control the variables of interest
• A survey is perhaps the most common type of observational study

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Customer Opinion Questionnaire used by Chops City Grill Restaurant

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Modifying Data in Excel
Sorting and Filtering Data in Excel
Conditional Formatting of Data in Excel

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20 Top-Selling Automobiles in United States in March
2011

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Suppose that we want to sort these
automobiles by March 2010 sales
instead of by March 2011 sales.

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Modifying Data in Excel
Sorting and Filtering Data in Excel
• To sort the automobiles by March 2010 sales:
• Step 1: Select cells A1:F21
• Step 2: Click the Data tab in the Ribbon
• Step 3: Click Sort in the Sort & Filter group
• Step 4: Select the check box for My data has headers
• Step 5: In the first Sort by dropdown menu, select Sales (March 2010)
• Step 6: In the Order dropdown menu, select Largest to Smallest
• Step 7: Click OK

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Now let’s suppose that we are
interested only in seeing the sales
of models made by Toyota.

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Modifying Data in Excel
Sorting and Filtering Data in Excel
• Using Excel’s Filter function to see the sales of models made by Toyota
• Step 1: Select cells A1:F21

• Step 2: Click the Data tab in the Ribbon

• Step 3: Click Filter in the Sort & Filter group

• Step 4: Click on the Filter Arrow in column B, next to Manufacturer

• Step 5: If all choices are checked, you can easily deselect all choices by unchecking (Select
All). Then select only the check box for Toyota.
• Step 6. Click OK

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Suppose that we wanted to quickly
identify the automobile models for
which sales had decreased from
March 2010 to March 2011.

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Modifying Data in Excel
Conditional Formatting of Data in Excel
• Makes it easy to identify data that satisfy certain conditions in a data
set
• To identify the automobile models for which sales had decreased
from March 2010 to March 2011:
• Step 1: Starting with the original data, select cells F1:F21
• Step 2: Click on the Home tab in the Ribbon
• Step 3: Click Conditional Formatting in the Styles group
• Step 4: Select Highlight Cells Rules, and click Less Than from the dropdown
menu
• Step 5: Enter 0% in the Format cells that are LESS THAN: box
• Step 6: Click OK

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Figure 2.7: Using Conditional Formatting in Excel to Highlight
Automobiles with Declining Sales from March 2010

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Creating Distributions from Data
Frequency Distributions for Categorical Data
Relative Frequency and Percent Frequency Distributions
Frequency Distributions for Quantitative Data
Histograms
Cumulative Distributions

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Creating Distributions from Data
Frequency Distributions for Categorical Data
• Frequency distribution: A summary of data that shows the number
(frequency) of observations in each of several nonoverlapping classes,
• Typically referred to as bins, when dealing with distributions

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 Data from a Sample of 50 Soft Drink Purchases

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Develop a frequency distribution
for these data.

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Creating Distributions from Data
Relative Frequency and Percent Frequency Distributions
• Relative frequency distribution: It is a tabular summary of data
showing the relative frequency for each bin
• Percent frequency distribution: Summarizes the percent frequency of
the data for each bin
• Percent frequency distribution is used to provide estimates of the
relative likelihoods of different values of a random variable

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 Relative Frequency and Percent Frequency Distributions of Soft Drink Purchases

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Creating Distributions from Data
Frequency Distributions for Quantitative Data
• Three steps necessary to define the classes for a frequency
distribution with quantitative data:
1. Determine the number of nonoverlapping bins.
2. Determine the width of each bin.
3. Determine the bin limits.

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Creating Distributions from Data
Year-End Audit Times (Days)

Frequency, Relative Frequency, and Percent Frequency Distributions for the Audit
Time Data

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Using Excel to Generate a Frequency Distribution for Audit Times Data

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Creating Distributions from Data
Histogram
• A common graphical presentation of quantitative data
• Constructed by placing the variable of interest on the horizontal axis
and the selected frequency measure (absolute frequency, relative
frequency, or percent frequency) on the vertical axis.
• The frequency measure of each class is shown by drawing a rectangle
whose base is determined by the class limits on the horizontal axis and
whose height is the corresponding frequency measure.

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Figure 2.12: Histogram for the Audit Time Data

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Figure 2.13: Creating a Histogram for the Audit Time Data Using Data Analysis
Toolpak in Excel

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 Completed Histogram for the Audit Time Data Using Data Analysis ToolPak in Excel

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Creating Distributions from Data
• Histograms provides information about the shape, or form, of a
distribution
• Skewness: Lack of symmetry
• Skewness is an important characteristic of the shape of a distribution

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 Histograms Showing Distributions with Different Levels of Skewness

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Creating Distributions from Data
Cumulative Distributions
• Cumulative frequency distribution: A variation of the frequency
distribution that provides another tabular summary of quantitative
data
• Uses the number of classes, class widths, and class limits developed for the
frequency distribution
• Shows the number of data items with values less than or equal to the upper
class limit of each class

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Table 2.8: Cumulative Frequency, Cumulative Relative
Frequency, and Cumulative Percent Frequency
Distributions for the Audit Time Data

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Measures of Location
Mean (Arithmetic Mean)
Median
Mode
Geometric Mean

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Measures of Location
•Mean/Arithmetic
  Mean
• Average value for a variable
• The mean is denoted by
• n = sample size
• = value of variable x for the first observation
• = value of variable x for the second observation
• = value of variable x for the nth observation

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 Data on Home Sal es

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Computation of Sample Mean
Illustration: Computation of the mean home selling price for the sample
of 12 home sales

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Measures of Location
Median
• Value in the middle when the data are arranged in ascending order
• Middle value, for an odd number of observations
• Average of two middle values, for an even number of observations

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Computation of Sample Median
Illustration: When the number of observations are odd
• Consider the class size data for a sample of five college classes:
46 54 42 46 32
• Arrange the class size data in ascending order
32 42 46 46 54
• Middlemost value in the data set = 46
• Median is 46

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Computation of Sample Median
Illustration - When the number of observations are even
• Consider the data on home sales in Cincinnati, Ohio, Suburb (Table 2.9)
• Arrange the data in ascending order:
108,000 138,000 138,000 142,000 186,000 199,500 208,000 254,000
254,000 257,500 298,000 456,250
• Median = average of two middle values
= "199,500 + 208,000" /"2" = 203,750
Middle Two Values

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Measures of Location
Mode
• Value that occurs most frequently in a data set
• Consider the class size data:
32 42 46 46 54
• Observe - 46 is the only value that occurs more than once
• Mode is 46
• Multimodal data - Data contain at least two modes
• Bimodal data - Data contain exactly two modes

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 Calculating the Mean, Median, and Modes for the Home
Sales Data using Excel

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Measures of Location
Geometric Mean
• nth root of the product of n values
• Used in analyzing growth rates in financial data.
• Sample geometric mean

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 Percentage Annual Returns and Growth Factors for the
Mutual Fund Data
• Illustration: Consider the percentage annual returns and growth factors for
the mutual fund data over the past 10 years
• We will determine the mean rate of growth for the fund over the 10-year
period

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Computation of Geometric Mean
•  Solution:
• Product of the growth factors:
$100(.779)(1.287)(1.109)(1.049)(1.158)(1.055)(.630)(1.265)(1.151)(1.021)
= 1.335
• Geometric mean of the growth factors:
= = 1.029
• Conclude that annual returns grew at an average annual rate of
(1.029 – 1)100% or 2.9%

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46
Calculating the Geometric Mean for the Mutual Fund Data Using Excel

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Measures of Variability
Range
Variance
Standard Deviation
Coefficient of Variation

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Measures of Variability
Annual Payouts for Two Different Histograms for Payouts of Past 20 Years
Investment Funds from Fund A and Fund B

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Computation of Range
Range
• Found by subtracting the smallest value from the largest value in a data set
• Illustration: Consider the data on home sales.xlsx
• Largest home sales price: $456,250
• Smallest home sales price: $108,000
• Range = Largest value – Smallest value
= $456,250 – $108,000
= $348,250
• Drawback: Range is based on only two of the observations and thus is
highly influenced by extreme values

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Measures of Variability
•Variance
 
• Measure of variability that utilizes all the data
• It is based on the deviation about the mean, which is the difference
between the value of each observation (xi) and the mean
• The deviations about the mean are squared while computing the
variance
• Sample variance, =
• Population variance , =

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Measures of Variability
•   Standard Deviation
• Positive square root of the variance
• Measured in the same units as the original data
• For sample , s =
• For population, σ =
• Coefficient of Variation

• Measures the standard deviation relative to the mean

• Expressed as a percentage

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Analyzing Distributions
Percentiles
Quartiles Empirical Rule
Z-Scores Identifying Outliers

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Analyzing Distributions
Percentiles
• Value of a variable at which a specified (approximate) percentage of
observations are below that value
• The pth percentile tells us the point in the data where:
• Approximately p percent of the observations have values less than the pth
percentile
• Approximately (100 – p) percent of the observations have values greater than
the pth percentile

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Analyzing Distributions
•Quartiles
 
• When the data is divided into four equal parts:
• Each part contains approximately 25% of the observations
• Division points are referred to as quartiles
• = first quartile, or 25th percentile
• = second quartile, or 50th percentile (also the median)
• = third quartile, or 75th percentile

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Analyzing Distributions
•z-score
 
• Measures the relative location of a value in the data set
• Helps to determine how far a particular value is from the mean
relative to the data set’s standard deviation
• Standardized value
• If , , . . . , is a sample of n observations
=
• = z-score for
• = sample mean
• s = sample standard deviation

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 Calculating z-Scores for the Home Sales Data in Excel

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Analyzing Distributions
Empirical Rule
• For data having a bell-shaped distribution:
• Within 1 standard deviation—approximately 68% of the data values
• Within 2 standard deviations—approximately 95% of the data values
• Within 3 standard deviations—almost all the data values

Identifying Outliers
• Outliers: Extreme values in a data set
• It can be identified using standardized values (z-scores)
• Any data value with a z-score less than –3 or greater than +3 is an outlier

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Measures of Association
Between Two Variables
Scatter Charts
Covariance
Correlation Coefficient

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Measures of Association Between Two Variables
•   Scatter Charts: Useful graph for analyzing the relationship between
two variables

• Covariance: Descriptive measure of the linear association between

two variables
• Sample covariance for a sample of size n with the observations
(, ), (, ), and so on: =
• Population covariance, =

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 Data for Bottled Water Sales at Queensland Amusement Park for a
Sample of 14 Summer Days

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 Chart Showing the Positive Linear Relation Between Sales and
High Temperatures

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 Calculating Covariance and Correlation Coefficient for Bottled Water
Sales Using Excel

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Measures of Association Between Two Variables
•   Correlation coefficient: Measures the relationship between two
variables
• Not affected by the units of measurement for x and y
• Sample correlation coefficient denoted by
• =
• = sample covariance =
• = sample standard deviation of x =
• = sample standard deviation of y =

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Interpretation of Correlation Coefficient
–1 ≤ r ≤ +1
r value Relationship between the x
and y variables

<0 Negative linear

Near 0 No linear relationship

>0 Positive linear

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Computation of Correlation Coefficient
•Illustration
 
• To determine the sample correlation coefficient for bottled water
sales at Queensland Amusement Park:
= = = 0.93

• There is a very strong linear relationship between high temperature

and sales

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