2 Descriptive Analytics

Descriptive Analytics
Descriptive Analytics
• Descriptive analytics is the starting point of analytics based solution
to problems. It helps to understand the data and provide directions for
predictive and prescriptive analytics. Business Intelligence (BI), which
largely involves creating reports and business dashboard that lead to
actionable insights, is essentially a descriptive analytics exercise.
DATA TYPES AND SCALES
• Structured and Unstructured Data
• Any data that is not originally in the matrix form with rows and
columns is an unstructured data. For example, e-mails, click streams,
textual data, images (photos and images generated by medical
devices), log data, and videos. Machine generated data such as
images generated by satellite, magnetic resonance imaging (MRI),
electrocardiogram (ECG) and thermography are few examples of
unstructured data.
• Structured Data
• Cross-sectional, Time Series, and Panel Data
1. Cross-Sectional Data: A data collected on many variables of interest at the same
time or duration of time is called cross-sectional data. For example, consider data
on movies such as budget, box-office collection, actors, directors, genre of the
movie during year 2017.
• 2. Time Series Data: A data collected for a single variable such as demand for
smartphones collected over several time intervals (weekly, monthly, etc.) is called a
time series data.
• 3. Panel Data: Data collected on several variables (multiple dimensions) over
several time intervals is called panel data (also known as longitudinal data). Example
of a panel data is data collected on variables such as gross domestic product (GDP),
Gini index, and unemployment rate for several countries over several years.
TYPES OF DATA MEASUREMENT
SCALES
• Nominal Scale (Qualitative Data)
Nominal scale refers to variables that are basically names (qualitative

data) and also known as categorical variables. For example, variables
such as marital status (single, married, divorced) and industry type
(manufacturing, healthcare, banking and finance) fall under nominal
scale.
SCALES
• Ordinal Scale
Ordinal scale is a variable in which the value of the data is captured from an ordered
set, which is recorded in the order of magnitude. For example, in many survey data,
Likert scale is used. Likert scale is finite (usually a 5 point scale) and the data
collector would have defined the order of preference.
For example, assume that a feedback is collected on a training program using 5-

point Likert scale in which 1 = Poor, 2 = Fair, 3 = Good, 4 = Very Good, and 5 =
Excellent.
SCALES
• Interval Scale
Interval scale corresponds to a variable in which the value is chosen from an interval set.
Variable such as temperature measured in centigrade (°C) or intelligence quotient (IQ)
score are examples of interval scale. In interval scale, the ratios do not make sense.
For example, 40°C is not twice hot as 20°C.

Similarly, a person with an IQ score of 160 is not twice smarter than a person with an IQ
score of 80.
However, 40°C is 20°C more than 20°C, IQ score of 160 is 80 more than an IQ score of
80. In an interval scale, the reference is fixed arbitrarily, for example 0°C is fixed based
on the freezing point of water.
SCALES
• Ratio Scale
Any variable for which the ratios can be computed and are meaningful is called
ratio scale. Most variables come under this type; for example: demand for a product,
market share of a brand, sales, salary, and so on. If Ms Hawai Sundari’s salary is
40,000 per month and Ms Dawai Sundari’s salary is 90,000 per
month then we can interpret that Dawai Sundari earns 2.25 times the salary of
Hawai Sundari.
POPULATION AND SAMPLE
• Population is the set of all possible observations (often
called cases, records, subjects or data points) for a
• given context of the problem. The size of the population can
be very large in many cases. For example, in
• 2014, close to 834.08 million people were eligible to vote in
the Indian general elections (Source: Election
• Commission of India).
POPULATION AND SAMPLE
• Population (also known as universal set) is the set of all possible data
for a given context whereas sample is the subset taken from a
population. In many analytical problems, we make inference about the
population based on the sample data. There are many challenges in
sampling (process of selecting an
observation from the population). An incorrect sample may result in
bias and incorrect inference about the population
MEASURES OF CENTRAL TENDENCY
• Mean (or Average) Value
• Mean (or Average) Value with frequency
• Median (or Mid) Value
• Now (n + 1)/2 = (8/2) = 4. Thus the median is the 4th value in the data after
arranging them in the increasing order; in this case it is 260.
• The 5th and 6th observations are 240000 and 240000 and the average is
240000. Thus, the median salary for the data in Table 2.1 is 240000.
• Median is much more stable than the mean value, that is adding a
new observation may not change the median significantly. However,
the drawback of median is that it is not calculated using the entire
data like in the case of mean. We are simply looking for the
midpoint instead of using the actual values of the data.
• Mode
•
Mode is the most frequently occurring value in the data set. For example, in the
data ‘salary’ in Table 2.1, the value 240000 is appearing three times and is the mode
since all other values are observed only once.
In Microsoft Excel, the function ‘Mode(array)’ can be used for calculating mode.
Mode is the only measure of central tendency which is valid for qualitative
(nominal) data since the mean and median for
nominal data are meaningless.
MEASURES OF VARIATION
1. Range
2. Variance
3. Standard Déviation
1. Range
Range is the difference between maximum and minimum value of
the data. It captures the data spread.
In the data in Table 2.4, the range = 102 – 2 = 100.
2. Variance
Variance is a measure of variability in the data from the mean value. Variance for
population, s 2, is calculated using
2. Sample Variance
In case of a sample, the Sample Variance (S2) is calculated using
This is known as Bessel’s correction

2. Standard Deviation
The standard deviation obtained using
2. Sample Variance
This will result in underestimation of the standard deviation, a
phenomenon called downward bias. To overcome this bias, we divide
With (n − 1) instead of n.
Degrees of freedom
1. Degrees of freedom is equal to the number of independent variables in the

model (Trochim, 2005). For example, we can create any sample of size n with
mean value of X by randomly selecting (n − 1) values. We need to fix just one
out of n values. Thus the number of independent variables in this case is (n − 1).
2. Degrees of freedom is defined as the difference between the number of
observations in the sample and number of parameters estimated (Walker 1940,
Toothaker and Miller, 1996). If there are n observations in the sample and k
parameters are estimated from the sample, then the degrees of freedom is (n −
k). The value of X is estimated from the sample. Thus the degrees of freedom is
(n − 1).
Data Visualization
Histogram
Histogram is the visual representation of the data which can be used to
assess the probability distribution (frequency distribution) of the data. It is
a frequency distribution of data arranged in consecutive and non-
overlapping intervals. Histograms are created for continuous (numerical)
data.
1. Divide the data into finite number of non-overlapping and consecutive
bins (intervals).
2. Count the number of observations from the data that fall under each bin
(interval).
3. Create a frequency distribution (bin in the horizontal axis and frequency
in the vertical axis) using the information obtained in steps 1 and 2.
Histogram
Here Xmax and Xmin are the maximum and minimum values of the data and
W is desired the width of the bin (interval). Intervals in histograms are
usually of equal size
Histogram
The histogram of Bollywood movie budget in crores of rupees (1 crore
= 10 million)
Bar Chart
Bar chart is a frequency chart for qualitative variable (or categorical
variable). Histograms cannot be used when the variable is qualitative.
Bar chart can be used to assess the most-occurring and least-occurring
categories within a data set.
Bar Chart
The bar chart for the movie genre. Tt is evident that genres, drama and comedy, are
mostly preferred by the production houses in Bollywood.

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Descriptive Analytics

Nominal scale refers to variables that are basically names (qualitative

For example, assume that a feedback is collected on a training program using 5-

For example, 40°C is not twice hot as 20°C.

This is known as Bessel’s correction

1. Degrees of freedom is equal to the number of independent variables in the

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