MATH 1201/1202:INTRODUCTION TO

BUSINESS STATISTICS
DISPERSION & SKEWNESS

PETER NYANDIRI MECHA

STRATHMORE UNIVERSITY

December 1, 2023
OBJECTIVE

The objective of the present lesson is to impart the knowledge of

measures of dispersion and skewness and to enable the students to
distinguish between average, dispersion, skewness, moments and
kurtosis.

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
INTRODUCTION

In the previous chapter, we have explained the measures of

central tendency. It may be noted that these measures do not
indicate the extent of dispersion or variability in a distribution.
The dispersion or variability provides us one more step in
increasing our understanding of the pattern of the data
If in a business there is a high degree of variability in the raw
material, then it could not find mass production economical
Suppose an investor is looking for a suitable equity share for
investment. While examining the movement of share prices,
he should avoid those shares that are highly fluctuating-having
sometimes very high prices and at other times going very low

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEANING AND DEFINITION OF DISPERSION

The various measures of central value give us one single figure

that represents the entire data. But the average alone cannot
adequately describe a set of observations, unless all the
observations are the same
Definition
Dispersion is the degree to which numerical data tend to spread
about an average value
Or
Dispersion is the degree of the scatter or variation of the variable
about a central value
.

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
Measure of dispersion

There are different bases on which the spread of the data can be
measured
1 Spread about mean this is concerned with measuring the
distance between the items and their common mean.There are
two measures of this type employed i.e the mean deviation
and the standard deviation
2 central percentage spread of items These measures have
links with the median i.e quartile deviation and percentiles
3 overall spread of items this measure is called range

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
Range

Definition
Range Is the numerical difference between the smallest and largest
values values of items in a set or distribution
i.e Range = Largest value − Smallest value

Example
The daily number of rejected items detected from separate output
of twoindustrial machines over fourteen days were

Machine 1 4 7 1 2 2 6 2 3 0 4 5 3 7 4
Machine 2 3 2 2 3 3 2 4 1 1 3 2 4 2 2

Determine range for machine 1 and Machine 2

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
RANGE
SOLUTION
MACHINE 1
Largest value=7 and smallest =0 , hence Range=7-0=7
MACHINE 2
Largest value=4 and smallest =1 , hence Range=4-1=3
Coefficient of Range Is given by
L−S
C .R =
L+S
7
∴ C .Rfor Machine 1 = = 1
7
and
3
∴ C .Rfor Machine 2 = = 0.6
5

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
Limitation o range

It is based only on two items and does not cover all the items
in a distribution
It is subject to wide fluctuations from sample to sample based
on the same population.
It fails to give any idea about the pattern of distribution

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
 MEAN DEVIATION
Definition
Mean deviation is a measure of dispersion that gives the absolute
difference (i.e ignoring "-" signs) between each item and the mean

-The mean deviation is much more representative measure than the

range since all item values are taken into account in its calculation.
The mean deviation (MD) is calculated through the use of the
following fomulae
|x − x̄ | |d|
P P
for set MD = =
P n n
f |x − x̄ | f |d|
P
for a frequency distribution MD = =
n n
where d = |x − x̄ |

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
 MEAN DEVIATION
Example
Note: | − 6| = |6| = 6
Calculate the mean deviation 43,75,48,39,51,47,50,47
SOLUTION

43 + 75 + 48 + 39 + 51 + 47 + 50 + 47
mean(x̄ ) = = 50
8
|43 − 50| + |75 − 50| + · · · + |47 − 50|
∴ MD =
8
7 + 25 + 2 + 11 + 1 + 3 + 0 + 3
= = 6.5
8
In other words, each value in the set is, on average ,6.5 units
awayfrom the common mean
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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEAN DEVIATION

Example
STUDENT ACTIVITY
Calculate the mean deviation for the following data

no. of sales 0 − 4 5 − 9 10 − 14 15 − 19 20 − 24 25 − 29
no.of salesmen 1 14 23 21 15 6

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
INTERQUARTILE RANGE OR QUARTILE DEVIATION

The interquartile range or the quartile deviation is a better

measure of variation in a distribution than the range. Here,
avoiding the 25 percent of the distribution at both the ends uses
the middle 50 percent of the distribution

Interquartile range = Q3 − Q1

Many times the interquartile range is reduced in the form of

semi-interquartile range or quartile deviation as shown below
Q3 − Q1
QUARTILE DEVIATION =
2

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
INTERQUARTILE RANGE OR QUARTILE DEVIATION

When quartile deviation is small, it means that there is a

small deviation in the central 50 percent items
contrast, if the quartile deviation is high, it shows that the
central 50 percent items have a large variation. It may be
noted that in a symmetrical distribution, the two quartiles,
that is, Q3 and QI are equidistant from the median i.e
M − Q1 = Q3 − M

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION

The standard deviation is similar to the mean deviation in

that here too the deviations are measured from the mean
the standard deviation is preferred to the mean deviation or
the quartile deviation or the range because it has desirable
mathematical properties
The standard deviation is given by the formula
s
(x − x̄ )2
P
S.Dorσ =
n

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION

Example
Calculate the standard deviation of the following set of values 2,4,6
and 8 Solution:
Step 1:Calculate the mean

2+4+6+8
x̄ = =5
4
Step 2: find the sum of the squares of deviations of items from the
mean
(2 − 5)2 + (4 − 5)2 + (6 − 5)2 + (8 − 5)2 =9 + 1 + 1 + 9 = 20

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION
Cont.....
Example
Step 3: Divide the sum by the number of items and take the
square root
s
20 √
= 5 = 2.24(2dp)
4

Student activity
Find the standard deviation of 6,11,14,8,11 and 9
Also the standard deviation can be computed using the formula
s
P 2
x
σ= − x̄ 2
n
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STANDARD DEVIATION

Standard deviation foe a frequency distribution or grouped

data
For large sets of data , a frequency distribution is normally
compiled and computational formula for standard deviation for a
set needs to be duly adapted
The formula is given by
sP  P 2 s P 2
fx 2 fx fx
σ= P − P or P − x̄ 2
f f f

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION
Example
The data below relates to the number of successful sales made by
the salesman employed by a large microcomputer firm in a
particular quarter. calculate the standard deviation of number of
sales
number of sales number of salesman
0−4 1
5−9 14
10 − 14 23
15 − 19 21
20 − 24 15
25 − 29 6

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION

Example

number of sales number of salesman mid-point(x) fx fx 2

0−4 1 2 2 4
5−9 14 7 98 686
10 − 14 23 12 276 3312
15 − 19 21 17 357 6069
20 − 24 15 22 330 7260
25 − 29 6 27 162 21705
Totals 80 1225 21705

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
STANDARD DEVIATION

Example

s
2
21705 1225

σ= − = 6.1sales
80 80

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
Coefficient of Variation

Since standard deviation is an absolute measure of dispersion

as it measures variation in the same units as the original data.
As such, it cannot be a suitable measure while comparing two
or more distributions
For this purpose, we should use a relative measure of
dispersion. One such measure of relative dispersion is the
coefficient of variation, which relates the standard deviation
and the mean such that the standard deviation is expressed as
a percentage of mean

Standard deviation σ
cv (coefficient of variation) = × 100% = × 100%
Mean x̄

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
Coefficient of Variation
Example
Over a period of three months the daily number of components
produced by two comparable machines was measured , giving the
following statistics
Machine A: mean=242.8; sd=20.5, Machine B: mean=281.3;
sd=23.0
Solution
20.5
cv (coefficient of variation )A = × 100% = 8.4%
242.8
23.0
cv (coefficient of variation )B = × 100% = 8.2%
281.3
Although the sd for machine B is higher in absolute terms, the
dispersion for machine A is higher in relative terms
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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
skewness

Two distributions may have the same mean and standard deviation
but may differ widely in their overall appearance as can be seen
from the following: In both these distributions the value of mean
and standard deviation is the same (x̄ = 15, σ = 5). But it does
not imply that the distributions are alike in nature The distribution
on the left-hand side is The distribution on the first is a
symmetrical one whereas the distribution on the second one is
symmetrical or skewed. Measures of skewness help us to
distinguish between different types of distributions

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
skewness

Figure:
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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
skewness

Definition
A distribution is said to be ’skewed’ when the mean and the
median fall at different points in the distribution, and the
balance (or centre of gravity) is shifted to one side or the
other-to left or right

The concept of skewness will be clear from the following three

diagrams showing a symmetrical distribution. a positively skewed
distribution and a negatively skewed distribution

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
skewness
1 Symmetrical Distribution:It is clear from the diagram (1)
that in a symmetrical distribution the values of mean, median
and mode coincide spread of the frequencies is the same on
both sides of the centre point of the curve
2 Positively Skewed Distribution. In the positively skewed
distribution the value of the mean is maximum and that of
mode least-the median lies in between the two as is clear from
the diagram (2).
3 Negatively Skewed Distribution. In a negatively skewed
distribution the value of mode is maximum and that of mean
least-the median lies in between the two. In the positively
skewed distribution the frequencies are spread out over a
greater range of values on the high-value end of the curve
(the right-hand side) than they are on the low-value end
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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
skewness

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEASURE OF SKEWNESS

There are four measures of skewness, each divided into

absolute and relative measures. The relative measure is known
as the coefficient of skewness and is more frequently used
than the absolute measure of skewness
when a comparison between two or more distributions is
involved, it is the relative measure of skewness, which is used
The measures of skewness are: (i) Karl Pearson’s measure, (ii)
Bowley’s measure, (iii) Kelly’s measure, and (iv) Moment’s
measure

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEASURE OF SKEWNESS

Karl Pearson’s measure

The formula for measuring skewness as given by Karl Pearson is as
follows:
Skewness=mean-mode
therefore
The coefficient of skewness is
mean − mode
SKp =
standard deviation
by using the formula of mode = 3mean − 2median we have
3(mean − median)
SKp =
standard deviation

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEASURE OF SKEWNESS

summary
when
SKp < 0:shows there is left or negative skew
SKp = 0:or (mode=mean) , this symmetrical distribution
SKp > 0:shows there is right or positive skew
NOTE:
the greater the value of SKp (positive or negative ), the more the
distribution is skewed

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEASURE OF SKEWNESS
Example
The data below relates to the number of successful sales made by
the salesman employed by a large microcomputer firm in a
particular quarter. calculate the standard deviation of number of
sales
number of sales number of salesman
0−4 1
5−9 14
10 − 14 23
15 − 19 21
20 − 24 15
25 − 29 6

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS
MEASURE OF SKEWNESS

STUDENT ACTIVITY
Example
compute mode, mean , standard deviation and coefficient of
skewness and interpret the results

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MATH 1201/1202:INTRODUCTION TO BUSINESS STATISTICS