Statistics For Management-MB0024

MBA -1 SEM Assignment – Set 2

L. Megha Syam 510925494

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Q1.
What do you mean by sample survey? What are the different sampling
methods? Briefly describe them.

Answer :

Sample is a finite subset of a population drawn from it to estimate the

characteristics of the population. Sampling is a tool which enables us to draw
conclusions about the characteristics of the population.

Survey sampling describes the process of selecting a sample of elements from a

target population in order to conduct a survey.

A survey may refer to many different types or techniques of observation, but in the
context of survey sampling it most often refers to a questionnaire used to measure
the characteristics and/or attitudes of people. The purpose of sampling is to reduce
the cost and/or the amount of work that it would take to survey the entire target
population. A survey that measures the entire target population is called a census.

Sample survey can also be described as the technique used to study about a
population with the help of a sample. Population is the totality all objects about
which the study is proposed. Sample is only a portion of this population, which is
selected using certain statistical principles called sampling designs (this is for
guaranteeing that a representative sample is obtained for the study). Once the
sample decided information will be collected from this sample, which process is
called sample survey.

It is incumbent on the researcher to clearly define the target population. There are
no strict rules to follow, and the researcher must rely on logic and judgment. The
population is defined in keeping with the objectives of the study.

Sometimes, the entire population will be sufficiently small, and the researcher can
include the entire population in the study. This type of research is called a census
study because data is gathered on every member of the population.

Usually, the population is too large for the researcher to attempt to survey all of its
members. A small, but carefully chosen sample can be used to represent the
population. The sample reflects the characteristics of the population from which it is
drawn.

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Sampling methods are classified as either probability or non-probability. In
probability samples, each member of the population has a known non-zero
probability of being selected. Probability methods include random sampling,
systematic sampling, and stratified sampling. In non-probability sampling,
members are selected from the population in some non-random manner. These
include convenience sampling, judgment sampling, quota sampling, and
snowball sampling. The advantage of probability sampling is that sampling error
can be calculated. Sampling error is the degree to which a sample might differ from
the population. When inferring to the population, results are reported plus or minus
the sampling error. In non-probability sampling, the degree to which the sample
differs from the population remains unknown.

Probability Sampling Methods

1. Random sampling is the purest form of probability sampling. Each member of

the population has an equal and known chance of being selected. When there
are very large populations, it is often difficult or impossible to identify every
member of the population, so the pool of available subjects becomes biased.
2. Systematic sampling is often used instead of random sampling. It is also
called an Nth name selection technique. After the required sample size has been
calculated, every Nth record is selected from a list of population members. As
long as the list does not contain any hidden order, this sampling method is as
good as the random sampling method. Its only advantage over the random
sampling technique is simplicity. Systematic sampling is frequently used to select
a specified number of records from a computer file.
3. Stratified sampling is commonly used probability method that is superior to
random sampling because it reduces sampling error. A stratum is a subset of the
population that share at least one common characteristic. Examples of stratums
might be males and females, or managers and non-managers. The researcher
first identifies the relevant stratums and their actual representation in the
population. Random sampling is then used to select a sufficient number of
subjects from each stratum. "Sufficient" refers to a sample size large enough for
us to be reasonably confident that the stratum represents the population.
Stratified sampling is often used when one or more of the stratums in the
population have a low incidence relative to the other stratums.

Non Probability Methods

1. Convenience sampling is used in exploratory research where the researcher is

interested in getting an inexpensive approximation of the truth. As the name
implies, the sample is selected because they are convenient. This non-probability
method is often used during preliminary research efforts to get a gross estimate
of the results, without incurring the cost or time required to select a random
sample.
2. Judgment sampling is a common non-probability method. The researcher
selects the sample based on judgment. This is usually extension of convenience
sampling. For example, a researcher may decide to draw the entire sample from
one "representative" city, even though the population includes all cities. When

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 using this method, the researcher must be confident that the chosen sample is
truly representative of the entire population.
3. Quota sampling is the non-probability equivalent of stratified sampling. Like
stratified sampling, the researcher first identifies the stratums and their
proportions as they are represented in the population. Then convenience or
judgment sampling is used to select the required number of subjects from each
stratum. This differs from stratified sampling, where the stratums are filled by
random sampling.
4. Snowball sampling is a special non-probability method used when the desired
sample characteristic is rare. It may be extremely difficult or cost prohibitive to
locate respondents in these situations. Snowball sampling relies on referrals from
initial subjects to generate additional subjects. While this technique can
dramatically lower search costs, it comes at the expense of introducing bias
because the technique itself reduces the likelihood that the sample will represent
a good cross section from the population.

Q2.
What is the different between correlation and regression? What do you
understand by Rank Correlation? When we use rank correlation and when
we use Pearsonian Correlation Coefficient? Fit a linear regression line in
the following data –

X 12 15 18 20 27 34 28 48
Y 123 150 158 170 180 184 176 130

Answer :

Correlation
When two or more variables move in sympathy with other, then they are said to be
correlated. If both variables move in the same direction then they are said to be
positively correlated. If the variables move in opposite direction then they are said
to be negatively correlated. If they move haphazardly then there is no correlation
between them.

Correlation analysis deals with

1) Measuring the relationship between variables.
2) Testing the relationship for its significance.
3) Giving confidence interval for population correlation measure.

Regression
Regression is defined as, “the measure of the average relationship between two or
more variables in terms of the original units of the data.” Correlation analysis
attempts to study the relationship between the two variables x and y. Regression
analysis attempts to predict the average x for a given y. In Regression it is
attempted to quantify the dependence of one variable on the other. The dependence
is expressed in the form of the equations.

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Different between correlation and regression

Correlation and linear regression are not the same. Consider these differences:

• Correlation quantifies the degree to which two variables are related.

Correlation does not find a best-fit line (that is regression). You simply are
computing a correlation coefficient (r) that tells you how much one variable
tends to change when the other one does.
• With correlation you don't have to think about cause and effect. You simply
quantify how well two variables relate to each other. With regression, you do
have to think about cause and effect as the regression line is determined as
the best way to predict Y from X.
• With correlation, it doesn't matter which of the two variables you call "X" and
which you call "Y". You'll get the same correlation coefficient if you swap the
two. With linear regression, the decision of which variable you call "X" and
which you call "Y" matters a lot, as you'll get a different best-fit line if you
swap the two. The line that best predicts Y from X is not the same as the line
that predicts X from Y.
• Correlation is almost always used when you measure both variables. It rarely
is appropriate when one variable is something you experimentally
manipulate. With linear regression, the X variable is often something you
experimental manipulate (time, concentration...) and the Y variable is
something you measure.
• The correlation answers the STRENGTH of linear association between paired
variables, say X and Y. On the other hand, the regression tells us the FORM
of linear association that best predicts Y from the values of X.
• (2a) Correlation is calculated whenever:
* both X and Y is measured in each subject and quantifies how much they are
linearly associated.
* in particular the Pearson's product moment correlation coefficient is used
when the assumption of both X and Y are sampled from normally-distributed
populations are satisfied
* or the Spearman's moment order correlation coefficient is used if the
assumption of normality is not satisfied.
* correlation is not used when the variables are manipulated, for example, in
experiments.

(2b) Linear regression is used whenever:

* at least one of the independent variables (Xi's) is to predict the dependent
variable Y. Note: Some of the Xi's are dummy variables, i.e. Xi = 0 or 1,
which are used to code some nominal variables.
* if one manipulates the X variable, e.g. in an experiment.
• Linear regression are not symmetric in terms of X and Y. That is
interchanging X and Y will give a different regression model (i.e. X in terms of
Y) against the original Y in terms of X.
On the other hand, if you interchange variables X and Y in the calculation of
correlation coefficient you will get the same value of this correlation
coefficient.

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 • The "best" linear regression model is obtained by selecting the variables
(X's) with at least strong correlation to Y, i.e. >= 0.80 or <= -0.80
• The same underlying distribution is assumed for all variables in linear
regression. Thus, linear regression will underestimate the correlation of the
independent and dependent when they (X's and Y) come from different
underlying distributions.

Spearman's rank correlation coefficient or Spearman's rho, named after

Charles Spearman and often denoted by the Greek letter ρ (rho) or as rs, is a non-
parametric measure of correlation – that is, it assesses how well an arbitrary
monotonic function could describe the relationship between two variables, without
making any other assumptions about the particular nature of the relationship
between the variables. Certain other measures of correlation are parametric in the
sense of being based on possible relationships of a parameterized form, such as a
linear relationship.

In principle, ρ is simply a special case of the Pearson product-moment coefficient in

which two sets of data Xi and Yi are converted to rankings xi and yi before
calculating the coefficient. In practice, however, a simpler procedure is normally
used to calculate ρ. The raw scores are converted to ranks, and the differences di
between the ranks of each observation on the two variables are calculated.

If there are no tied ranks, then ρ is given by:

where:

di = xi − yi = the difference between the ranks of corresponding values Xi and Yi, and
n = the number of values in each data set (same for both sets).

If tied ranks exist, classic Pearson's correlation coefficient between ranks has to be
used instead of this formula.

One has to assign the same rank to each of the equal values. It is an average of
their positions in the ascending order of the values.

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Conditions under which P.E can be used.
1. Samples should be drawn from a normal population.
2. The value of “r” must be determined from sample values.
3. Samples must have been selected at random.

X 12 15 18 20 27 34 28 48
Y 123 150 158 170 180 184 176 130

Linear Regression Line for the above data can be plotted as :

Total Numbers : 8
Slope (b) :0.16701
Y-Intercept (a) : 154.65
Regression Equation : 154.66 + 0.17x

Q3.
What do you mean by business forecasting? What are the different
methods of business forecasting? Describe the effectiveness of time-series
analysis as a mode of business forecasting. Describe the method of moving
averages.

Answer:
Business forecasting refers to the analysis of past and present economic conditions
with the object of drawing inferences about probable future business conditions.
To forecast the future, various data, information and facts concerning to economic
condition of business for past and present are analyzed. The process of forecasting
includes the use of statistical and mathematical methods for long term, short term,
medium term or any specific term.

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Following are the main methods of business forecasting:-

1. Business Barometers
Business indices are constructed to study and analyze the business activities on the
basis of which future conditions are predetermined. As business indices are the
indicators of future conditions, so they are also known as “Business Barometers” or
“Economic Barometers‟. With the help of these business barometers the trend of
fluctuations in business conditions are made known and by forecasting a decision
can be taken relating to the problem. The construction of business barometer
consists of gross national product, wholesale prices, consumer prices, industrial
production, stock prices, bank deposits etc. These quantities may be concerted into
relatives on a certain base. The relatives so obtained may be weighted and their
average be computed. The index thus arrived at in the business barometer.

The business barometers are of three types:

i) Barometers relating to general business activities: it is also known as general
index of business activity which refers to weighted or composite indices of individual
index business activities. With the help of general index of business activity long
term trend and cyclical fluctuations in the „economic activities of a country are
measured but in some specific cases the long term trends can be different from
general trends. These types of index help in formation of country economic policies.

ii) Business barometers for specific business or industry: These barometers are used
as the supplement of general index of business activity and these are constructed to
measure the future variations in a specific business or industry.

iii) Business barometers concerning to individual business firm: This type of

barometer is constructed to measure the expected variations in a specific individual
firm of an industry.

2. Time Series Analysis is also used for the purpose of making business
forecasting. The forecasting through time series analysis is possible only when the
business data of various years are available which reflects a definite trend and
seasonal variation.

3. Extrapolation is the simplest method of business forecasting. By extrapolation,

a businessman finds out the possible trend of demand of his goods and about their
future price trends also. The accuracy of extrapolation depends on two factors: i)
Knowledge about the fluctuations of the figures, ii) Knowledge about the course of
events relating to the problem under consideration.

4. Regression Analysis
The regression approach offers many valuable contribution to the solution of the
forecasting problem. It is the means by which we select from among the many
possible relationships between variables in a complex economy those which will be
useful for forecasting. Regression relationship may involve one predicted or

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dependent and one independent variables simple regression, or it may involve
relationships between the variable to be forecast and several independent variables
under multiple regressions. Statistical techniques to estimate the regression
equations are often fairly complex and time-consuming but there are many
computer programs now available that estimate simple and multiple regressions
quickly.

5. Modern Econometric Methods

Econometric techniques, which originated in the eighteenth century, have recently
gained in popularity for forecasting. The term econometrics refers to the application
of mathematical economic theory and statistical procedures to economic data in
order to verify economic theorems. Models take the form of a set of simultaneous
equations. The value of the constants in such equations are supplied by a study of
statistical time series,

6. Exponential Smoothing Method This method is regarded as the best method

of business forecasting as compared to other methods. Exponential smoothing is a
special kind of weighted average and is found extremely useful in short-term
forecasting of inventories and sales.

7. Choice of a Method of Forecasting The selection of an appropriate method

depends on many factors – the context of the forecast, the relevance and
availability of historical data, the degree of accuracy desired, the time period for
which forecasts are required, the cost benefit of the forecast to the company, and
the time available for making the analysis.

Effectiveness of Time Series Analysis :

Time series analysis is also used for the purpose of making business forecasting.
The forecasting through time series analysis is possible only when the business data
of various years are available which reflects a definite trend and seasonal variation.
By time series analysis the long term trend, secular trend, seasonal and cyclical
variations are ascertained, analyzed and separated from the data of various years.

Merits:

i) It is an easy method of forecasting.

ii) By this method a comparative study of variations can be made.
iii) Reliable results of forecasting are obtained as this method is based on
mathematical model.

Method of Moving Averages

One of the most simple and popular technical analysis indicators is the moving
averages method. This method is known for its flexibility and user-friendliness. This
method calculates the average price of the currency or stock over a period of time.
The term “moving average” means that the average moves or follows a certain
trend. The aim of this tool is to indicate to the trader if there is a beginning of any

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new trend or if there is a signal of end to the old trend. Traders use this method, as
it is relatively easy to understand the direction of the trends with the help of moving
averages.
Moving average method is supposed to be the simplest one, as it helps to
understand the chart patterns in an easier way. Since the currency’s average price
is considered, the price’s volatile movements are evened. This method rules out the
daily fluctuation in the prices and helps the trader to go with the right trend, thus
ensuring that the trader trades in his own good.

We come across different types of moving averages, which are based on the way
these averages are computed. Still, the basis of interpretation of averages is similar
across all the types. The computation of each type set itself different from other in
terms of weightage it lays on the prices of the currencies. Current price trend is
always given a higher weightage. The three basic types of moving averages are viz.
simple, linear and exponential.

A simple moving average is the simplest way to calculate the moving price
averages. The historical closing prices over certain time period are added. This sum
is divided by the number of instances used in summation. For example, if the
moving average is calculated for 15 days, the past 15 historical closing prices are
summed up and then divided by 15. This method is effective when the number of
prices considered is more, thus enabling the trader to understand the trend and its
future direction more effectively.

A linear moving average is the less used one out of all. But it solves the problem of
equal weightage. The difference between simple average and linear average method
is the weightage that is provided to the position of the prices in the latter. Let’s
consider the above example. In linear average method, the closing price on the
15th day is multiplied by 15, the 14th day closing price by 14 and so on till the 1st
day closing price by 1. These results are totaled and then divided by 15.

The exponential moving average method shares some similarity with the linear
moving average method. This method lays emphasis on the smoothing factor, there
by weighing recent data with higher points than the previous data. This method is
more receptive to any market news than the simple average method. Hence this
makes exponential method more popular among traders.

Moving averages methods help to identify the correct trends and their respective
levels of resistance.

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Q4.
What is definition of Statistics? What are the different characteristics of
statistics? What are the different functions of Statistics? What are the
limitations of Statistics?

According to Croxton and Cowden, ‘Statistics is the science of collection,

presentation, analysis and interpretation of numerical data.’ Thus, Statistics
contains the tools and techniques required for the collection, presentation, analysis
and interpretation of data. This definition is precise and comprehensive.

Characteristic of Statistics
a. Statistics Deals with aggregate of facts: Single figure cannot be analyzed.

b. Statistics are affected to a marked extent by multiplicity of causes: The

statistics of yield of paddy is the result of factors such as fertility of soil,
amount of rainfall, quality of seed used, quality and quantity of fertilizer
used, etc.
c. Statistics are numerically expressed: Only numerical facts can be
statistically analyzed. Therefore, facts as ‘price decreases with increasing
production’ cannot be called statistics.
d. Statistics are enumerated or estimated according to reasonable standards
of accuracy: The facts should be enumerated (collected from the field) or
estimated (computed) with required degree of accuracy. The degree of
accuracy differs from purpose to purpose. In measuring the length of
screws, an accuracy upto a millimeter may be required, whereas, while
measuring the heights of students in a class, accuracy upto a centimeter
is enough.
e. Statistics are collected in a systematic manner: The facts should be
collected according to planned and scientific methods. Otherwise, they are
likely to be wrong and misleading.
f. Statistics are collected for a pre-determined purpose: There must be a
definite purpose for collecting facts. Eg. Movement of wholesale price of a
commodity.
g. Statistics are placed in relation to each other: The facts must be placed in
such a way that a comparative and analytical study becomes possible.
Thus, only related facts which are arranged in logical order can be called
statistics.

Functions of Statistics
1. It simplifies mass data
2. It makes comparison easier
3. It brings out trends and tendencies in the data
4. It brings out hidden relations between variables.
5. Decision making process becomes easier.

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Major limitations of Statistics are:
1. Statistics does not deal with qualitative data. It deals only with
quantitative data.
2. Statistics does not deal with individual fact: Statistical methods can be
applied only to aggregate to facts.
3. Statistical inferences (conclusions) are not exact: Statistical inferences
are true only on an average. They are probabilistic statements.
4. Statistics can be misused and misinterpreted: Increasing misuse of
Statistics has led to increasing distrust in statistics.
5. Common men cannot handle Statistics properly: Only statisticians can
handle statistics properly.

Q5.
What are the different stages of planning a statistical survey?
Describe the various methods for collecting data in a statistical
survey.

The planning stage consists of the following sequence of activities.

1. Nature of the problem to be investigated should be clearly defined in an
un- ambiguous manner.
2. Objectives of investigation should be stated at the outset. Objectives
could be to obtain certain estimates or to establish a theory or to verify a
existing statement to find relationship between characteristics etc.
3. The scope of investigation has to be made clear. It refers to area to be
covered, identification of units to be studied, nature of characteristics to
be observed, accuracy of measurements, analytical methods, time, cost
and other resources required.
4. Whether to use data collected from primary or secondary source should
be determined in advance.
5. The organization of investigation is the final step in the process. It
encompasses the determination of number of investigators required, their
training, supervision work needed, funds required etc.

Collection of primary data can be done by anyone of the following methods.

i. Direct personal observation
ii. Indirect oral interview
iii. Information through agencies
iv. Information through mailed questionnaires
v. Information through schedule filled by investigators

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Q6.
What are the functions of classification? What are the requisites of a
good classification? What is Table and describe the usefulness of a
table in mode of presentation of data?

The functions of classification are:

a. It reduce the bulk data
b. It simplifies the data and makes the data more comprehensible
c. It facilitates comparison of characteristics
d. It renders the data ready for any statistical analysis

Requisites of good classification are :

i. Unambiguous: It should not lead to any confusion
ii. Exhaustive: every unit should be allotted to one and only one class
iii. Mutually exclusive: There should not be any overlapping.
iv. Flexibility: It should be capable of being adjusted to changing
situation.
v. Suitability: It should be suitable to objectives of survey.
vi. Stability: It should remain stable through out the investigation
vii. Homogeneity: Similar units are placed in the same class.
viii. Revealing: Should bring out essential features of the collected
data.

Table is nothing but logical listing of related data in rows and columns.
b. Objectives of tabulation are:-
i. To simplify complex data
ii. To highlight important characteristics
iii. To present data in minimum space
iv. To facilitate comparison
v. To bring out trends and tendencies
vi. To facilitate further analysis

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