Measures of

UNIT 4 MEASURES OF VARIATION AND Variation and

Skewness
SKEWNESS

Objectives
After going through this unit, you will learn:
• the concept and significance of measuring variability
• the concept of absolute and relative variation
• the computation of several measures of variation, such as the range,
quartile deviation, average deviation and standard deviation and also
their coefficients
• the concept of skewness and its importance
• the computation of coefficient of skewness.
Structure
4.1 Introduction
4.2 Significance of Measuring Variation
4.3 Properties of a Good Measure of Variation
4.4 Absolute and Relative Measures of Variation
4.5 Range
4.6 Quartile Deviation
4.7 Average Deviation
4.8 Standard Deviation
4.9 Coefficient of Variation
4.10 Skewness
4.11 Relative Skewness
4.12 Summary
4.13 Key Words
4.14 Self-assessment Exercises
4.15 Further Readings

4.1 INTRODUCTION
In the previous unit, we were concerned with various measures that are used
to provide a single representative value of a given set of data. This single
value alone cannot adequately describe a set of data. Therefore, in this unit,
we shall study two more important characteristics of a distribution. First we
shall discuss the concept of variation and later the concept of skewness.
A measure of variation (or dispersion) describes the spread or scattering of
the individual values around the central value. To illustrate the concept of
variation, let us consider the data given below:
57
Data Collection Firm A Firm B Firm C
and Analysis
Daily Sales (Rs.) Daily Sales (Rs.) Daily Sales (Rs.)
5000 5050 4900
5000 5025 3100
5000 4950 2200
5000 4835 1800
5000 5140 13000
�
X� = 5000 �
X� = 5000 �
X� = 5000

Since the average sales for firms A, B and C is the same, we are likely to
conclude that the distribution pattern of the sales is similar. It may be
observed that in Firm A, daily sales are the same irrespective of the day,
whereas there is less amount of variation in the daily sales for firm 13 and
greater amount of variation in the daily sales for firm C. Therefore, different
sets of data may have the same measure central tendency but differ greatly in
terms of variation.

4.2 SIGNIFICANCE OF MEASURING

VARIATION
Measuring variation is significant for some of the following purposes.
i) Measuring variability determines the reliability of an average by pointing
out as to how far an average is representative of the entire. data.
ii) Another purpose of measuring variability is to determine the nature and
cause variation in order to control the variation itself.
iii) Measures of variation enable comparisons of two or more distributions
with regard to their variability.
iv) Measuring variability is of great importance to advanced statistical
analysis. For example, sampling or statistical inference is essentially a
problem in measuring variability.

4.3 PROPERTIES OF A GOOD MEASURE OF

VARIATION
A good measure of variation should possess, as far as possible, the same
properties as those of a good measure of central tendency.
Following are some of the well known measures of variation which provide a
numerical index of the variability of the given data:
i) Range
ii) Average or Mean Deviation
iii) Quartile Deviation or Semi-Interquartile Range
iv) Standard Deviation

58
 Measures of
4.4 ABSOLUTE AND RELATIVE MEASURES Variation and
OF VARIATION Skewness

Measures of variation may be either absolute or relative. Measures of

absolute variation are expressed in terms of the original data. In case the two
sets of data are expressed in different units of measurement, then the absolute
measures of variation are not comparable. In such cases, measures of relative
variation should be used. The other type of comparison for which measures
of relative variation are used involves the comparison between two sets of
data having the same unit of measurement but with different means. We shall
now consider in turn each of the four measures of variation.

4.5 RANGE
The range is defined as the difference between the highest (numerically
largest) value and the lowest (numerically smallest) value in a set of data. In
symbols, this may be indicated as:
R = H - L,
where R = Range; H = Highest Value; L = Lowest Value
As an illustration, consider the daily sales data for the three firms as given
earlier.
For firm A, R = H - L = 5000 - 5000 = 0
For firm B, R = H - L = 5140 - 4835 = 305
For firm C, R = H - L = 13000 - 1800 = 11200
The interpretation for the value of range is very simple.
In this example, the variation is nil in case of daily sales for firm A, the
variation is small in case of firm B and variation is very large in case of firm
C.
The range is very easy to calculate and it gives us some idea about the
variability of the data. However, the range is a crude measure of variation,
since it uses only two extreme values.
The concept of range is extensively used in statistical quality control. Range
is helpful in studying the variations in the prices of shares and debentures and
other commodities that are very sensitive to price changes from one period to
another. For meteorological departments, the range is a good indicator for
weather forecast.
For grouped data, the range may be approximated as the difference between
the upper limit of the largest class and the lower limit of the smallest class.
The relative measure corresponding to range, called the coefficient of range,
is obtained by applying the following formula
���
Coefficient of range = ���
59
Data Collection Activity A
and Analysis
Following are the prices of shares of a company from Monday to Friday:

Day : Monday Tuesday Wednesday Thursday Friday

Price : 670 678 750 705 720

Compute the value of range and interpret the value.

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Activity B
Calculate the coefficient of range from the following data:

Sales No. of Sales No. of

(Rs. lakhs) Days (Rs. lakhs) days
30-40 12 60-70 19
40-50 18 70-80 13
50-60 20 80-90 8

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4.6 QUARTILE DEVIATION

The quartile deviation, also known as semi-interquartile range, is computed
by taking the average of the difference between the third quartile and the first
quartile. In symbols, this can be written as:
�� − ��
Q.D. =
2
where Q1 = first quartile, and Q3 = third quartile.
The following illustration would clarify the procedure involved. For the data
given below, compute the quartile deviation.

Monthly Wages No. of workers Monthly Wages No. of Workers

(Rs.) (Rs.)
Below 850 12 1000-1050 62
850-900 16 1050-1100 75
900-950 39 1100-1150 30
950-1000 56 1150 and above 10
60
To compute quartile deviation, we need the values of the first quartile and the Measures of
Variation and
third quartile which can be obtained from the following table: Skewness

Monthly Wages No. of workers C.F.

(Rs.) f
Below 850 12 12
850-900 16 28
900-950 39 67
950 -1000 56 123
1000-1050 62 185
1050-1100 75 260
1100-1150 30 290
1150 and above 10 300
� ���
Q1 = Size of � th observation = �
= 75th observation which lies in the class
950 − 1000
N/4 − pcf 75 − 67
Q� = L + × i = 950 + × 50
f 56
50
= 950 + = 950 + 7.14 = 957.14
7
�� ����
Q3 = Size of �
th observation = �
= 225th observation which lies in the
class 1050 − 1100
3N/4 − pcf 225 − 185
Q� = L + × i = 1050 + × 50
f 75
2000
= 1050 + = 1050 + 26.67 = 1076.67
75
1076.67 − 957.14 119.53
Q.D. = = = 59.765
2 2
The relative measure corresponding to quartile deviation, called the
coefficient of quartile deviation, is calculated as given below:
� ��
Coefficient of Q.D. = �� ���
� �

The quartile deviation is superior to the range as it is not based on two

extreme values but rather on middle 50% observations. Another advantage of
quartile deviation is that it is the only measure of variability which can be
used for open-end distribution.
The disadvantage of quartile deviation is that it ignores the first and the last
25% observations.
Activity C
A survey of domestic consumption of electricity gave the following
distribution of the units consumed. Compute the quartile deviation and its
coefficient.
61
Data Collection Number of Number of Number of Number of
and Analysis
units consumers units consumers
Below 200 9 800-1000 45
200-400 18 1000-1200 38
400-600 27 1200-1400 20
600-800 32 1400 & above 11

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4.7 AVERAGE DEVIATION

The measure of average (or mean) deviation is an improvement over the
previous two measures in that it considers all observations in the given set of
data. This measure is computed as the mean of deviations from the mean or
the median. All the deviations are treated as positive regardless of sign. In
symbols, this can be represented by:
∑|� − ��| ∑ ∣ � − Median ∣
A.D. = or
� �
Theoretically speaking, there is an advantage in taking the deviations from
median because the sum of the absolute deviations (i.e. ignoring ± signs)
from median is minimum. In actual practice, however, arithmetic mean is
more popularly used in computation of average deviation.
For grouped data, the formula to be used is given as:
∑|� − ��|
A.D. =
�
As an illustration, consider the following grouped data which relate to the
sales of 100 companies.

Sales No. of days Sales No. of days

(Rs. thousand) (Rs. thousand)
40-50 10 70-80 30
50-60 15 80-90 12
60-70 25 90-100 8

To compute average deviation, we construct the following table:

Sales X No. of fX |� − � | �|� − � |

(Rs. thousand) m.p days
40-50 45 5 225 26 130
50-60 55 15 825 16 240
60-70 65 25 1625 6 150
62
 Measures of
70-80 75 30 2250 4 120 Variation and
Skewness
80-90 85 20 1700 14 280
90-100 95 5 475 24 120
N = 100∑fX = 7100 Σ�|� − ��| = 1040
∑fX 7100
X̄ = = = 71
N 100
Σ�|� − ��| 1040
A. � = = = 10.4
� 100
The relative measure corresponding to the average deviation, called the
coefficient of average deviation, is obtained by dividing average deviation by
the particular average used in computing the average deviation. Thus, if
average deviation has been computed from median, the coefficient of average
deviation shall be obtained by dividing the average deviation by the median.
A.D. A.D.
Coefficient of A.D. = Median
or Mean

Although the average deviation is a good measure of variability, its use is

limited. If one desires only to measure and compare variability among several
sets of data, the average deviation may be used.
The major disadvantage of the average deviation is its lack of mathematical
properties. This is more true because non-use of signs in its calculations
makes it algebraically inconsistent.
Activity D
Calculate the average deviation and coefficient of the average deviation from
the following data.

Sales No. of days Sales No. of days

(Rs. thousand) (Rs. thousand)
Less than 20 3 Less than 50 23
Less than 30 9 Less than 60 25
Less than 40 20

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63
Data Collection
and Analysis
4.8 STANDARD DEVIATION
The standard deviation is the most widely used and important measure of
variation. In computing the average deviation, the signs are ignored. The
standard deviation overcomes this problem by squaring the deviations, which
makes them all positive. The standard deviation, also known as root mean
square deviation, is generally denoted by the lower case Greek letter a (read
as sigma). In symbols, this can be expressed as

∑(X − ��)�
�=�
N

The square of the standard deviation is called variance. Therefore

Variance = � �
The standard deviation and variance become larger as the square of the data
becomes greater. More important, it is readily comparable with other
standard deviations and the greater the standard deviation, the greater the
variability.
For grouped data, the formula is

∑f(X − ��)�
�=�
N

The following formulas for standard deviation are mathematically equivalent

to the above formula and are often more convenient to use in calculations.

∑fX � ∑fX � ∑fX �

�=� −� � =� − �� �
N N N

∑fd� ∑fd � X−A

=� −� � × i Where d =
N N i

Remarks: If the data represent a sample of size N from a population, then it

can be proved that the sum of the squared deviations are divided by (N-1)
instead of by N. However, for large sample sizes, there is very little
difference in the use of (N-1) or N in computing the standard deviation.
To understand the formula for grouped data, consider the following data
which relate to the profits of 100 companies.

Profit No. of Profit No. of

(Rs. lakhs) companies (Rs. lakhs) companies
8-10 8 14-16 30
10-12 12 16-18 20
12-14 20 18-20 10

To compute standard deviation we construct the following table:

64
 Measures of
Profits m.p. f d= fd fd2 Variation and
(Rs. lakhs) X (X-15)/2 Skewness

8-10 9 8 -3 -24 72
10-12 11 12 -2 -24 48
12-14 13 20 -1 -20 20
14-16 15 30 0 0 0
16-18 17 20 +1 +20 20
18-20 19 10 +2 +20 40
N = 100 ∑fd = −28 ∑fd� = 200

∑fd� ∑fd � 200 −28 �

�=� −� � ×i=� −� � ×2
N N 100 100

= √2 − 0.0784 × 2 = √1.9216 × 2
= 1.3862 × 2 = 2.7724 ≃ 2.77
The standard deviation is most commonly used to measure variability, while
all other measures have rather special uses. In addition, it is the only measure
possessing the necessary mathematical properties (like combined standard
deviation) to make it useful for advanced statistical work.
Activity E
The following data show the daily sales at a petrol station. Calculate the
mean and standard deviation.

Number of No. of days Number of No. of days

litres sold litres sold
700-1000 12 1900-2200 18
1000-1300 18 2200-2500 5
1300-1600 20 2500-2800 2
1600-1900

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4.9 COEFFICENT OF VARIATION

A frequently used relative measure of variation is the coefficient of variation,
denoted by C.V. This measure is simply the ratio of the standard deviation to
mean expressed as the percentage.
�
Coefficient of variation = C. V. = �
× 100 when the coefficient of variation is
less in the data, it is said to be less variable or more consistent.
65
Data Collection Consider the following data which relate to the mean daily sales and standard
and Analysis deviation for four regions.

Region Mean daily sales (Rs. Standard deviation

thousand) (Rs. thousand)
1 86 10.45
2 45 5.86
3 72 72
4 61 11.32

To determine which region is most consistent in terms of daily sales, we shall

compute the coefficients of variation. You may notice that the mean daily
sales are not equal for each region.
10.45 5.86
C. V⋅� = × 100 = 12.15; C. V⋅� = × 100 = 13.02
86 45
9.54 11.32
C. V⋅� = × 100 = 13.25; C. V⋅� = × 100 = 18.56
72 61
As the coefficient of variation is minimum for Region 1, therefore the most
consistent region is Region 1.
Activity F
A factory produces two types of electric lamps, A and B. In an experiment
relating to their life, the following results were obtained.

Length of life Type A Type B

(in hours) No. of lamps No. of lamps
500-700 5 4
700-900 11 30
900-1100 26 12
1100-1300 10 8
1300-1500 8 6

Compare the variability of the life of the two types of electric lamps using the
coefficient of variation.
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4.10 SKEWNESS
The measures of central tendency and variation do not reveal all the
66 characteristics of a given set of data. For example, two distributions may
have the same mean and standard deviation but may differ widely in the Measures of
Variation and
shape of their distribution. Either the distribution of data is symmetrical or it Skewness
is not. If the distribution of data is not symmetrical, it is called asymmetrical
or skewed. Thus skewness refers to the lack of symmetry in distribution.
A simple method of detecting the direction of skewness is to consider the
tails of the distribution (Figure I). The rules are:
Data are symmetrical when there are no extreme values in a particular
direction so that low and high values balance each other. In this case, mean =
median = mode. (see Fig I(a) ).
If the longer tail is towards the lower value or left hand side, the skewness is
negative. Negative skewness arises when the mean is decreased by some
extremely low values, thus making mean < median < mode. (see Fig I(b) ).
If the longer tail of the distribution is towards the higher values or right hand
side, the skewness is positive. Positive skewness occurs when mean is
increased by some unusually high values, thereby making mean > median >
mode. (see Fig I(c) )

Fig. 1 (a): Symmetrical

Fig. 1 (b): Negatively skewed Distribution

Fig. 1 (c): Positively skewed distribution

67
Data Collection
and Analysis
4.11 RELATIVE SKEWNESS
In order to make comparisons between the skewness in two or more
distributions, the coefficient of skewness (given by Karl Pearson) can be
defined as:
Mean - Mode
SK. =
S. D.
If the mode cannot he determined, then using the approximate relationship,
Mode = 3 Median - 2 Mean, the above formula reduces to
3 (Mean - Median)
SK. =
S.D.
if the value of this coefficient is zero, the distribution is symmetrical; if the
value of the coefficient is positive, it is positively skewed distribution, or if
the value of the coefficient is negative, it is negatively skewed distribution. In
practice, the value of this coefficient usually lies between ± 1.
When we are given open-end distributions where extreme values are present
in the data or positional measures such as median and quartiles, the following
formula for coefficient of skewness (given by Bowley) is more appropriate.
Q� + Q� − 2Median
SK. =
Q � − Q�
Again if the value of this coefficient is zero, it is a symmetrical distribution.
For positive value, it is positively skewed distribution and for negative value,
it is negatively skewed distribution.
To explain the concept of coefficient of skewness, let us consider the
following data.

Profits No. of Profits No. of

(Rs. thousand) companies (Rs. thousand) companies
10-12 7 18-20 25
12-14 15 20-22 10
14-16 18 22-24 5
16-18 20

Since the given distribution is not open-ended and also the mode can be
determined, it is appropriate to apply Karl Pearson formula as given below:
Mean - Mode
SK. =
S. D.
Profits m.p. f d= fd fd2
(Rs. thousand) X (X- 17)/2
10-12 11 7 -3 -21 63
12-14 13 15 -2 -30 60
14-16 15 18 -1 -18 18
68
 Measures of
16-18 17 20 0 0 0 Variation and
Skewness
18-20 19 25 +1 25 25
20-22 21 10 +2 20 40
22-24 23 5 +3 15 45
N = 100 ∑fd = −9 ∑fd� = 251

∑�� 9
�� = � + × � = 17 − × 2 = 17 − 0.18 = 16.82
� 100
d� 5
Mode = L + × i = 18 + × 2 = 18 + 0.5 = 18.5
d� + d� 5 + 15

∑fd� ∑fd 251 −9

�=� −� �×i=� −� �×2
N N 100 100

√2.51 − 0.0081 × 2 = √2.509 × 2. = 1.5817 × 2 = 3.1634

16.82 − 18.5
Sk = = −0.5310
3.1634
This value of coefficient of skewness indicates that the distribution is
negatively skewed and hence there is a greater concentration towards the
higher profits.
The application of Bowley's method would be clear by considering the
following data:
Sales No. of companies c.f.
(Rs. lakhs)
Below 50 8 8
50-60 12 20
60-70 20 40
70-80 25 65
80 & above 15 80
� ��
Q1 = size of � th observation = �
= 20th observation which lies in the class
50-60
N/4 − pcf 20 − 8
Q� = L + × i = 50 + × 10 = 60
f 12
� ��
Q2 = Median = size of � th observation = �
= 40th observation which lies in
the class 60-70
N/2 − pcf 40 − 20
Q� = Med. = L + × i = 60 + × 10 = 70
f 20
�� ���
Q3 = Size of �
th observation = �
= 60 th observation which lies in the
class 70-80
3N/4 − pcf 60 − 40
Q� = L + × i = 70 + × 10 = 78
f 25
69
Data Collection �� + �� − 2 Median
and Analysis Coefficient of �� =
�� − ��
78 + 60 − 2 × 70
= = −0.11
78 − 60
This value of coefficient of skewness indicates that the distribution is slightly
skewed to the left and therefore there is a greater concentration of the sales at
the higher values than the lower values of the distribution.

4.12 SUMMARY
In this unit, we have shown how the concepts of measures of variation and
skewness are important. Measures of variation considered were the range,
average deviation, quartile deviation and standard deviation. The concept of
coefficient of variation was used to compare relative variations of different
data. The skewness was used in relation to lack of symmetry.

4.13 KEY WORDS

Average Deviation is the arithmetic mean of the absolute deviations from
the mean or the median.
Coefficient of Variation is a ratio of standard deviation to mean expressed
as percentage.
Interquartile Range considers the spread in the middle 50% (Q3 – Q1 ) of
the data.
Quartile Deviation is one half the distance between first and third quartiles.
Range is the difference between the largest and the smallest value in a set of
data.
Relative Variation is used to compare two or more distributions by relating
the variation of one distribution to the variation of the other.
Skewness refers to the lack of symmetry.
Standard Deviation is the root mean square deviation of a given set of data.
Variance is the square of standard deviation and is defined as the arithmetic
mean of the squared deviations from the mean.

4.14 SELF- SSESSMENT EXERCISES

1) Discuss the important of measuring variability for managerial decision
making.
2) Review the advantages and disadvantages of each of the measures of
variation.
3) What is the concept of relative variation? What problem situations call for
the use of relative variation in their solution?
4) Distinguish between Karl Pearson's and Bowley's coefficient of
skewness. Which one of these would you prefer and why?
5) Compute the range and the quartile deviation for the following data:
70
 Measures of
Monthly wage No. of workers Monthly wage No. of Variation and
(Rs.) (Rs.) workers Skewness

700-800 28 1000-1100 30
800-900 32 1100-1200 25
900-1000 40 1200-1300 15

6) Compute the average deviation for the following data:

No. of shares No. of No. of shares No. of

applied for applicants applied for applicants
50-100 2500 250-300 900
100-150 1500 300-350 750
150-200 1300 350-400 675
200-250 1100 400-450 525
450-500 450

7) Calculate the mean, standard deviation and variance for the following
data

No. of defects Frequency No. of defects Frequency

per item per item
0-5 18 25-30 150
5-10 32 30-35 100
10-15 50 35-40 90
15-20 75 40-45 80
20-25 125 45-50 50

8) Records were kept on three employees who wrapped packages on sweet

boxes during the Diwali holidays in a big sweet house. The study yielded
the following data

Employee Mean number of Standard deviation’

packages
A 23 1.45
B 45 5.86
C 32 3.54
i) Which package wrapper was most productive?
ii) Which employee was the most consistent?
iii) What measure did you choose to answer part (ii) and why?
9) The following data relate to the mileage of two types of tyre: 71
Data Collection Life (in kms.) Number of Tyres
and Analysis
Type A TypeB
20000-22000 230 200
22000-24000 270 275
24000-26000 450 470
26000-28000 375 300
28000 30000 125 155
i) Which of the two types gives a higher average life?
ii) If prices are the same for both the types, which would you prefer
and why?
10) The following table gives the distribution of daily travelling allowance to
salesmen in a company:

Travelling No. of Travelling No. of

Allowance (in Rs.) salesmen Allowance(Rs.) salesmen
100-120 14 180-200 15
120-140 16 200-220 7
140-160 20 220-240 6
160-180 18 240-260 4

Compute Karl Pearson's coefficient of skewness and comment on its value.

11) Calculate Bowley's coefficient of skewness from the following data:

Monthly wages No. of workers Monthly wages No. of workers

Below 600 10 800-900 20
600-700 25 900-1000 15
700-800 45 1000 & above 5

12) You are given the following information before and after the settlement
of workers' strike.

Before sell After settlement

lenient of strike of strike
No, or workers 1000 950
Average Wage (Rs.) 1300 1350
Standard Deviation (Rs.) 400 425
Median Wage (Rs.) 1325 1300

Assuming that the increase in wage is a loss to the management, comment on

the gains and losses from the point of view of workers and that of
management.
72
 Measures of
4.15 FURTHER READINGS Variation and
Skewness
Bowerman, B.L., O’ Connell, R.T., Business Statistics in Practice, McGraw
Hill.
Clark, T.C. and E.W. Jordan. Introduction to Business and Economic
Statistics, South-Western Publishing Co.:
Enns, P.G., Business Statistics, Richard D. Irwin Inc.: Homewood.
Gupta, S.P. and M.P. Gupta. Business Statistics, Sultan Chand & Sons: New
Delhi.
Moskowitz, H. and G.P. Wright. Statistics for Management and Economics,
Charles E. Merill Publishing Company.

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