MIT School of Management (PG)

MBA503A: STATISTICAL TECHNIQUES

Case-1:
Using MS Excel, plot 2 separate Line graphs to perform Time line analysis for Open Price and
Close Price.
Draw trend lines.
Interpret your results.
(You are required to submit the soft copy (Excel file) of the line graphs and the interpretation).
Case-2:
(i) Choose stock of another company from the same industry (E.g.: If you have chosen
the first company as Bank of India, you may choose the second company as any other
bank like Bank of Baroda).

Obtain Descriptive statistics for the two chosen companies. Interpret the result.
(ii) Compare the Coefficient of variation for the Closing Price of the two companies and
interpret stock of which of the two companies is more stable in the given 5-month
period.

(You are required to submit the soft copy (Excel file) of the Descriptive statistics and the
interpretation).
Case 3: Acceptable Pins

A company supplies pins in bulk to a customer. The company uses an automatic lathe to produce
the pins. Due to many causes-vibrations, temperature, wear and tear, and the like-the lengths of
the pins made by the machine are normally distributed with a mean of 1.012 inches and a
standard deviation of 0.018 inch. The customer will buy only those pins with lengths in the
interval 1.00 ± 0.02 inch. In other words, the customer wants the length to be 1.00 inch but will
accept up to 0.02 inch deviation on either side. This 0.02 inch is known as the tolerance.

1. What percentage of the pins will be acceptable to the consumer?

In order to improve percentage accepted, the production manager and the engineers discuss
adjusting the population mean and standard deviation of the length of the pins.

2. If the lathe can be adjusted to have the mean of the lengths to any desired value, what
should it be adjusted to? Why?

3. Suppose the mean cannot be adjusted, but the standard deviation can be reduced. What
maximum value of the standard deviation would make 90% of the parts acceptable to the
consumer? (Assume the mean to be 1.012.)

4. Repeat question 3, with 95% and 99% of the pins acceptable.

5. In practice, which one do you think is easier to adjust, the mean or the standard
deviation? Why?

* Case taken from Complete Business Statistics by Amir Aczel & J. Sounderpandian, TATA Mc
Graw Hill.
Case 4: Tiresome Tires

A tire manufacturing company has invested a new, cheaper method for carrying out one of the
steps in the manufacturing process. The company wants to estimate the average strength of tires
manufactured by new method before adopting it, and compare it with the average strength of the
tires manufactured by old method because the new method could alter the interply shear strength
of the tires produced.

To take the decision regarding the acceptability of the new method, the evidence is gathered
through a destructive test of 40 randomly selected tires from each method. For estimating the
population mean of the interply shear strength of the tires produced by the old method and as
well as that of the tires produced by the new method. Following are the observations:

Method 1 Method 2
Tir Str Tir Stre Tir Stre Tir Stre
e eng e ngt e ngt e ngt
No. th No. h No. h No. h
1 271 21 269 1 271 21 268
3 3 3 3
2 275 22 274 2 274 22 266
5 0 1 4
3 274 23 273 3 270 23 275
5 1 1 7
4 273 24 270 4 273 24 273
1 7 1 6
5 279 25 275 5 274 25 274
9 4 7 1
6 279 26 269 6 267 26 276
3 0 9 7
7 270 27 279 7 277 27 275
5 7 3 1
8 272 28 276 8 267 28 272
9 1 6 3
9 274 29 276 9 267 29 276
7 0 7 3
10 272 30 277 10 272 30 275
5 7 1 0
11 251 31 277 11 274 31 268
5 4 2 6
12 278 32 271 12 277 32 272
2 3 5 7
13 271 33 274 13 268 33 275
8 1 0 7
14 271 34 278 14 278 34 278
9 9 6 8
15 275 35 272 15 273 35 267
1 3 2 6
16 275 36 271 16 274 36 277
5 3 0 9
17 268 37 278 17 276 37 267
5 1 0 6
18 270 38 270 18 274 38 269
0 6 8 0
19 271 39 277 19 266 39 276
2 6 0 4
20 277 40 273 20 278 40 272
8 8 9 0

Using sampling distribution of mean, calculate interval estimates for average strength of the
tires manufactured by both the methods. Find these estimates for value of α as 10%, 5% and
3%. Explain your answers. Justify proper value of α.
Case 5: Risk and Return
According to the Capital Asset Pricing Model (CAPM) the risk associated with a capital asset is
proportional to the slope b obtained by regressing the asset‘s past returns with the corresponding
returns of the average portfolio called the market portfolio . (The return of the market portfolio
represents the return earned by the average investor. It is weighted average of the returns from all
the assets in the market.) The larger the slope b of an asset, the larger is the risk associated with
that asset. A slope b of 1 represents average risk.
The Returns from an electronic Firm’s stock and the corresponding returns from the market
portfolio for the past 15 years are given below.
Market Return (%) Stocks Return (%)
16.02 21.05
12.17 17.25
11.48 13.1
17.62 18.23
20.01 21.52
14 13.26
13.22 15.84
17.79 22.18
15.46 16.26
8.09 5.64
11 10.55
18.52 17.86
14.05 12.75
8.79 9.13
11.6 13.87
1. Carry out the regression and find the slope b for the stock. What is the regression
equation?

2. Does the value of the slope indicate that the stock has above-average risk? (For the
purposes of this case assume that the risk is average if the slope is in the range 1 ± 0.1,
below average if it is less than 0.9, and above average if it is more than 1.1.)

3. * Case taken from Complete Business Statistics by Amir Aczel & J. Sounderpandian,
TATA Mc Graw Hill.