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Advanced Business Quantitative Methods L4: Reinhold Kamati, PHD

This document discusses measures of association between two variables. It introduces covariance and correlation as descriptive measures of the linear relationship between two numerical variables. It provides an example to calculate covariance and correlation coefficient using sample data. The document also discusses interpreting the covariance and correlation coefficient. Additionally, it addresses ethical issues in data analysis, emphasizing the importance of objective and neutral reporting of results.

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Everson Murungweni
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73 views

Advanced Business Quantitative Methods L4: Reinhold Kamati, PHD

This document discusses measures of association between two variables. It introduces covariance and correlation as descriptive measures of the linear relationship between two numerical variables. It provides an example to calculate covariance and correlation coefficient using sample data. The document also discusses interpreting the covariance and correlation coefficient. Additionally, it addresses ethical issues in data analysis, emphasizing the importance of objective and neutral reporting of results.

Uploaded by

Everson Murungweni
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Advanced Business Quantitative Methods L4

Reinhold Kamati, PhD

April 11, 2019

Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 1/7
Descriptive Statistics: Measures of Association between two
Variables

1 Measures of association between two variables


1 Covariance, Interpretation of the Covariance Correlation Coefficient &
Correlation Coefficient
2 Ethical Issues: Pitfalls Numerical Measures of location

Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 2/7
1. Measures of association between two variables
1 Covariance & Correlation
1 Thus far we have examined numerical methods used to summarize the
data for one variable at a time.
2 Often managers or decision makers are interested in the relationship
between two variables.
1 Advertising & Sales revenue
2 Training & Empoyees performance
2 Covariance & Correlation as descriptive measures of the relationship
between two variables.
1 The covariance measures the strength of the linear relationship between
two numerical variables (X and Y).
2 Sample covariance
P
(xi − x̄)(yi − ȳ )
cov (X , Y ) = sxy =
n−1
3 Sample coefficient of correlation
cov (X , Y ) sxy
r= =
sx sy sx sy
Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 3/7
1. Measures of association between two variables
1 To do: Calculate the Co-variance & correlation coefficent
1 We will use the data in the table below to calculate sxy & r .
xi yi
2
5 50
10 30
15 10
3 Table below provides the cost of a fast-food hamburger meal and the
cost of two movie tickets in 10 cities around the world.

4
5 Use Excel to calculate the covariance & correlation coefficient for these
data.
Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 4/7
1. Measures of association between two variables cont.../

1 Interpretation of variance & Correlation Coefficient


1 The covariance has a major flaw as a measure of the linear relationship
between two numerical variables.
2 Covariance can have any value, whatter is the sign attached the
number.
3 To better determine the relative strength of the relationship, you need
to compute the coefficient of correlation
2 Coefficient of Correlation
1 The coefficient of correlation measures the relative strength of a linear
relationship between two numerical variables.

Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 5/7
2. Ethical Issues: Pitfalls Numerical Measures of location

1 You have studied so far various statistics that measure the properties
of central tendency, variation, and shape.
1 What next? Next step is analysis and interpretation of the calculated
statistics.
2 Practise objective analysis
1 So make your analysis is objective
2 Objectivity in data analysis means reporting the most appropriate
numerical descriptive measures for a given data set.
3 You must avoid errors that may arise either in the objectivity of your
analysis or in the subjectivity of your interpretation.
3 Your interpretation will remain subjective.
1 Everyone sees the world from different perspectives.
2 Thus, because data interpretation is subjective, you must do it in a fair,
neutral, and clear manner.

Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 6/7
Ethical Issues....

1 Ethical issues are vitally important to all data analysis.


1 You should document both good and bad results.
2 Present your oral & written reports (results), in a fair, objective, and
neutral manner.
3 Unethical behavior occurs when
1 You willfully choose an inappropriate summary measure to distort the
facts in order to support a particular position.
2 You selectively fail to report pertinent findings because it would be
detrimental to the support of a particular position.

Reinhold Kamati, PhD Advanced Business Quantitative Methods L4 April 11, 2019 7/7

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