Introduction: The term “statistics” is used in two senses: first in plural

sense meaning a collection of numerical facts or estimates—the figure

themselves. It is in this sense that the public usually think of statistics,
e.g., figures relating to population, profits of different units in an industry
etc. Secondly, as a singular noun, the term ‘statistics’ denotes the
various methods adopted for the collection, analysis and interpretation
of the facts numerically represented.

In singular sense, the term ‘statistics’ is better described as

statistical methods. In our study of the subject, we shall be more
concerned with the second meaning of the word ‘statistics’.

Meaning of Statistics: The subject Statistics, as it seems, is not a new

discipline but it is as old as the human society, itself. It has been used
right from the existence of life on this earth, although the sphere of its
utility was very much restricted.

In the olden days Statistics was regarded as the ‘Science Statecraft’

and was the by-product of the administrative activity of the state. The
word Statistics seems to have been derived from the Latin word ‘status’
or the Italian word ‘statista’ or the German word ‘statistik’ or the French
word ‘statistique’ each of which means a political state.

Definitions: Statistics has been defined differently by different authors

and each author has assigned new limits to the field which should be
included in its scope. We can do no better than give selected definitions
of statistics by some authors and then come to the conclusion about the
scope of the subject.

A.L. Bowley defines, “Statistics may be called the science of

counting”. At another place he defines, “Statistics may be called the
science of averages”. Both these definitions are narrow and throw light
only on one aspect of Statistics.

According to King, “The science of statistics is the method of judging

collective, natural or social, phenomenon from the results obtained from
the analysis or enumeration or collection of estimates”.Many a time
counting is not possible and estimates are required to be made.

Therefore, Boddington defines it as “the science of estimates and

probabilities”.

But this definition also does not cover the entire scope of statistics. The
statistical methods are methods for the collection, analysis and
interpretation of numerical data and form a basis for the analysis and
comparison of the observed phenomena.
In the words of Croxton &Cowden, “Statistics may be defined as the
collection, presentation, analysis and interpretation of numerical data”.

Horace Secrist has given an exhaustive definition of the term statistics

in the plural sense. According to him, “By statistics we mean aggregates
of facts affected to a marked extent by a multiplicity of causes
numerically expressed, enumerated or estimated according to
reasonable standards of accuracy collected in a systematic manner for
a pre-determined purpose and placed in relation to each other”. This
definition makes it quite clear that as numerical statement of facts,
‘statistic’ should possess the following characteristics.

Characteristics of statistics:

1. Statistics are aggregate of facts: A single age of 20 or 30 years is

not statistics, a series of ages are. Similarly, a single figure relating to
production, sales, birth, death etc., would not be statistics although
aggregates of such figures would be statistics because of their
comparability and relationship.

2. Statistics are affected to a marked extent by a multiplicity of

causes: A number of causes affect statistics in a particular field of
enquiry, e.g., in production statistics are affected by climate, soil,
fertility, availability of raw materials and methods of quick transport.

3.Statistics are numerically expressed, enumerated or estimated:

The subject of statistics is concerned essentially with facts expressed in
numerical form—with theirquantitative details but not qualitative
descriptions. Therefore, facts indicated by terms such as ‘good’,
‘poor’ are not statistics unless a numerical equivalent, is assigned to
each expression. Also this may either beenumerated or estimated,
where actual enumeration is either not possible or is very difficult.

4.Statistics are numerated or estimated according to reasonable

standard of accuracy:
Personal bias and prejudices of the enumeration should not enter into
the counting or estimation of figures, otherwise conclusions from the
figures would not be accurate. The figures should be counted
or estimated according to reasonable standards of accuracy. Absolute
accuracy is neither necessary nor sometimes possible in social
sciences. But whatever standard of accuracy is once adopted, should
be used throughout the process of collection or estimation.

5. Statistics should be collected in a systematic manner for a

predetermined purpose: The statistical methods to be applied on the
purpose of enquiry since figures are always collected with some
purpose. If there is no predetermined purpose, all the efforts in
collecting the figures may prove to be wasteful. The purpose of a series
of ages of husbands and wives may be to find whether young
husbands have young wives and the old husbands have old wives.

6. Statistics should be capable of being placed in relation to each

other: The collected figure should be comparable and well-connected in
the same department of inquiry. Ages of husbands are to be compared
only with the corresponding ages of wives, and not with, say, heights of
trees.

Functions of Statistics: The functions of statistics may be enumerated

as follows:

(i) To present facts in a definite form : Without a statistical study our

ideas are likely to be vague, indefinite and hazy, but figures helps as
to represent things in their true perspective. For example, the
statement that some students out of 1,400 who had appeared, for a
certain examination, were declared successful would not give as
much information as the one that 300 students out of 400 who took
the examination were declared successful.

(ii) To simplify unwieldy and complex data : It is not easy to treat

large numbers and hence theyare simplified either by taking a few
figures to serve as a representative sample or by taking average to
give a bird’s eye view of the large masses. For example, complex
data may be simplified by presenting them in the form of a table,
graph or diagram, or representing it through an average etc.

(iii) To use it as a technique for making comparisons : The

significance of certain figures can be better appreciated when they
are compared with others of the same type. The comparison between
two different groups is best represented by certain statistical
methods, such as average, coefficients,

(iv) To enlarge individual experience: An individual’s knowledge is

limited to what he can observe and see; and that is a very small part of
the social organism. His knowledge is extended n various ways by
studying certain conclusions and results, the basis of which are
numerical investigations. For example, we all have general impression
that the cost of living has increased. But to know to what extent the
increase has occurred, and how far the rise in prices has affected
different income groups, it would be necessary to ascertain the rise in
prices of articles consumed by Them .rates, ratios, etc.
(v)To provide guidance in the formulation of policies: The purpose
of statistics is to enable correct decisions, whether they are taken by a
businessman or Government. In fact statistics is a great servant of
business in management, governance and development. Sampling
methods are employed in industry in tacking the problem of
standardization of products. Big business houses maintain a separate
department for statistical intelligence, the work of which is to collect,
compare and coordinate figures for formulating future policies of the firm
regarding production and sales.

(vi) To enable measurement of the magnitude of a

phenomenon : But for the development of the statistical science, it
would not be possible to estimate the population of a country or to know
the quantity of wheat, rice and other agricultural commodities produced
in the country during any year.

Scope of Statistics: Let us now discuss briefly the importance of

statistics in some different disciplines

(i) Statistics in Planning: Statistics is indispensable in planning—may

it be in business, economics or government level. The modern age is
termed as the ‘age of planning’ and almost all organisations in the
government or business or management are resorting to planning for
efficient working and for formulating policy decision.

To achieve this end, the statistical data relating to production,

consumption, birth, death, investment, income are of paramount
importance. Today efficient planning is a must for almost all countries,
particularly the developing economies for their economic development.

(ii) Statistics in Mathematics: Statistics is intimately related to and

essentially dependent upon mathematics. The modern theory of
Statistics has its foundations on the theory of probability which in turn is
a particular branch of more advanced mathematical theory of Measures
and Integration. Ever increasing role of mathematics into statistics has
led to the development of a new branch of statistics called Mathematical
Statistics.

Thus Statistics may be considered to be an important member of the

mathematics family. In the words of Connor, “Statistics is a branch of
applied mathematics which specialises in data.”

(iii) Statistics in Economics: Statistics and Economics are so

intermixed with each other that it looks foolishness to separate them.
Development of modern statistical methods has led to an extensive use
of statistics in Economics.
All the important branches of Economics—consumption, production,
exchange, distribution, public finance—use statistics for the purpose of
comparison, presentation, interpretation, etc. Problem of spending of
income on and by different sections of the people, production of national
wealth, adjustment of demand and supply, effect of economic policies
on the economy etc. simply indicate the importance of statistics in the
field of economics and in its different branches.

Statistics of Public Finance enables us to impose tax, to provide

subsidy, to spend on various heads, amount of money to be borrowed
or lent etc. So we cannot think of Statistics without Economics or
Economics without Statistics.

(iv)Statistics in Social Sciences: Every social phenomenon is affected

to a marked extent by a multiplicity of factors which bring out the
variation in observations from time to time, place to place and object to
object. Statistical tools of Regression and Correlation Analysis can be
used to study and isolate the effect of each of these factors on the given
observation.

Sampling Techniques and Estimation Theory are very powerful and

indispensable tools for conducting any social survey, pertaining to any
strata of society and then analysing the results and drawing valid
inferences. The most important application of statistics in sociology is in
the field of Demography for studying mortality (death rates), fertility
(birth rates), marriages, population growth and so on.

In this context Croxton and Cowden have rightly remarked:

“Without an adequate understanding of the statistical methods, the

investigators in the social sciences may be like the blind man
groping in a dark room for a black cat that is not there. The
methods of statistics are useful in an over-widening range of
human activities in any field of thought in which numerical data
may be had.”

(v) Statistics in Trade: As already mentioned, statistics is a body of

methods to make wise decisions in the face of uncertainties. Business
is full of uncertainties and risks. We have to forecast at every step.
Speculation is just gaining or losing by way of forecasting. Can we
forecast without taking into view the past? Perhaps, no. The future trend
of the market can only be expected if we make use of statistics. Failure
in anticipation will mean failure of business.
Changes in demand, supply, habits, fashion etc. can be anticipated with
the help of statistics. Statistics is of utmost significance in determining
prices of the various products, determining the phases of boom and
depression etc. Use of statistics helps in smooth running of the
business, in reducing the uncertainties and thus contributes towards the
success of business.

(vi) Statistics in Research Work: The job of a research worker is to

present the result of his research before the community. The effect of a
variable on a particular problem, under differing conditions, can be
known by the research worker only if he makes use of statistical
methods. Statistics are everywhere basic to research activities. To keep
alive his research interests and research activities, the researcher is
required to lean upon his knowledge and skills in statistical methods.

Importance of Statistics: These days statistical methods are

applicable everywhere. There is no field of work in which statistical
methods are not applied. According to A L. Bowley, ‘A knowledge of
statistics is like a knowledge of foreign languages or of Algebra, it may
prove of use at any time under any circumstances”. The importance of
the statistical science is increasing in almost all spheres of knowledge,
e g., astronomy, biology, meteorology, demography, economics and
mathematics. Economic planning without statistics is bound to be
baseless.

Statistics serve in administration, and facilitate the work of formulation

of new policies. Financial institutions and investors utilise statistical data
to summaries the past experience. Statistics are also helpful to an
auditor, when he uses sampling techniques or test checking to audit the
accounts of his client.

Limitations of Statistics: The scope of the science of statistic is

restricted by certain limitations :

1. The use of statistics is limited numerical studies: Statistical

methods cannot be applied to study the nature of all type of
phenomena. Statistics deal with only such phenomena as are capable
of being quantitatively measured and numerically expressed. For,
example, the health, poverty and intelligence of a group of individuals,
cannot be quantitatively measured, and thus are not suitable subjects
for statistical study.

2. Statistical methods deal with population or aggregate of

individuals rather than with individuals. When we say that the
average height of an Indian is 1 metre 80 centimetres, it shows the
height not of an individual but as found by the study of all individuals.
3. Statistical relies on estimates and approximations: Statistical
laws are not exact laws like mathematical or chemical laws. They are
derived by taking a majority of cases and are not true for every
individual. Thus the statistical inferences are uncertain.

4. Statistical results might lead to fallacious conclusions by

deliberate manipulation of figures and unscientific handling. This is
so because statistical results are represented by figures, which are
liable to be manipulated. Also the data placed in the hands of an expert
may lead to fallacious results. The figures may be stated without their
context or may be applied to a fact other than the one to which they
really relate. An interesting example is a survey made some years ago
which reported that 33% of all the girl students at John Hopkins
University had married University teachers. Whereas the University had
only three girls student at that time and one of them married to a
teacher.

Distrust of Statistics: Due to limitations of statistics an attitude of

distrust towards it has been developed. There are some people who
place statistics in the category of lying and maintain that, “there are
three degrees of comparison in lying-lies, dammed lies and statistics”.
But this attitude is not correct. The person who is handling statistics
may be a liar or inexperienced. But that would be the fault not of
statistics but of the person handling them.
The person using statistics should not take them at their face value. He
should check the result from an independent source. Also only experts
should handle the statistics otherwise they may be misused. It may be
noted that the distrust of statistics is due more to insufficiency of
knowledge regarding the nature, limitations and uses of statistics then
to any fundamental inadequacy in the science of statistics. Medicines
are meant for curing people, but if they are unscientifically handle by
quacks, they may prove fatal to the patient. In both the cases, the
medicine is the same; but its usefulness or harmfulness depends upon
the man who handles it.

We cannot blame medicine for such a result. Similarly, if a child cuts his
finger with a sharp knife, it is not a knife that is to be blamed, but the
person who kept the knife at a place that the child could reach it. These
examples help us in emphasizing that if statistical facts are misused by
some people it would be wrong to blame the statistics as such. It is the
people who are to be blamed. In fact statistics are like clay which
can be moulded in any way.
Uses / Application of Inferential Statistics in managerial Decision
making.

Through the aid of statistical reports, the executives can gain the
summary picture of current operations. The following are some major
activities of typical, large and progressive organization which would
indicate how statistics helps in the efficient discharge of various
activities.
Marketing In the field of marketing, it is necessary first to find out what
can be sold and then to evolve a suitable strategy so that goods reach
the ultimate consumer. A skilful analysis of data or population,
purchasing powers, habits of people, competition, transportation cost
etc. should precede any attempt to establish a new market.
Production The decisions about what to produce, how much to
produce, when to produce, for whom to produce is based largely on
facts analyzed statistically. Statistical tools are also of immense help in
Quality Control, optimum inventory level and in dealing with labor
problems etc.
Finance Financial forecasts, Break-even analysis and investment
decisions under uncertainty are but part of financial Manager's activities
not only this statistics play its important role in dealing with inventories,
cash balances, etc. apart from this the area of security analysis is also
highly quantitative.
Banking Banking institutions with in their organization establish a
research department for the purpose of gathering and analyzing
information not only regarding their own operations but on general
economic conditions and on every live of business in which they might
be directly or indirectly interested.
Investment Statistics greatly assist investors in making clear and
valued judgment in his investment decision in selection of securities
which are safe and which have the best prospects of yielding a good
income. These investigations assist in determining whether to buy or
sell, or at what time to invest and when to disinvest, etc.
Purchase The purchase department in discharging its functions
makes use of statistical data to frame suitable purchase policies such
as from where to buy, at what time to buy and at what price to buy.
AccountingStatistical methods are also applied in accounting. The
auditing function makes frequent application of statistical sampling and
estimation procedure and the cost account uses regression analysis.
The accountant collects data on historical costs in course of auditing a
company's financial records.
Control The management control process combines statistical and
accounting methods in making the overall budget for the coming year
including sales material, labour and other costs and net profit and
capital requirements. It usually maintains a standard cost system for
controlling costs and setting prices of products.
Credit The credit department performs statistical analysis to determine
how much credit to expend to various customers. In the formulation of
future credit policy, the characteristics of those who have paid and
those who have defaulted are kept in mind.
Personnel The personnel department frames personnel policies based
on facts. It makes statistical study of wage rates, incentive plans, cost of
living, labor turn-over rates, employment trends, accident rate,
employee grievances, performance appraisal, training programs etc.
Such studies help the personnel department in the process of
manpower planning.
Research and Development Many big organizations have research
and development department which are primarily concerned with finding
out how existing products can be improved, what new product lines can
be added and how the optimal use of resources made. In the absence
of factual data it is almost impossible to carry-out fruitful research and
development programs.
 Measures of Central Tendency

The tendency of some certain value around which data tends to cluster
is called central tendency. Following are three important measures of
central tendency which are very commonly used in business.

1. Mean
2. Median
3. Mode.

1. Mean
One of the most important measures of central tendency is the
mean; following three types of means are calculated according to
the requirements of the user.

A) Arithmetic Mean
B) Geometric Mean
C) Harmonic Mean

(A) Arithmetic Mean

Arithmetic mean can be calculated by adding all the observations
and dividing this sum by total number of observations. Following
are two methods for calculation of arithmetic mean.

(I) Direct Method:

For ungrouped data, the following formula is used

X=
∑X
N
Where, X =Arithmetic Mean

∑ X=∑ of all observations

N=Total No .of observations
(II) Short cut Method:
The arithmetic mean can also be calculated by taking deviations from
any arbitrary point in which case the formula shall be:

X =A +
∑d
N
Where, d= ( X− A )
And, A=Arbitrary Point
Grouped Data:
For grouped data, the following formula is used –

X=
∑ fX
N
Where, X =Arithmetic Mean
X =mid point of various classes
f =frequency of each class
N=∑ of frequency column

(ii) Short cut Method

In case of ungrouped data short cut method takes more time in
calculation as compared to direct method for the sake of
convenience and considerable saving of time, this method is used
in case of grouped data under this method, following formula is
used.

X =A +
∑ fd ×i
N
X−A
Where, d=
i
X =Arithmetic mean
A=Assumed mean

∑ fd =∑ of deviations ¿ assumed
valuemultiplied by frequency
i=Class interval
Combined Mean of Two Groups:
If we have the arithmetic mean and number of observations of
two or more than two related groups, we can compute combined
average of these groups by applying the following formula.
N 1 X 1+ N 2 X 2
X 12=
N 1+ N 2
Where, X 12=Combined mean of the two groups
X 1 =Arithmetic mean of the first group
X 2 =Arithmetic mean of the second group
N 1=No . of observations∈the first group
N 2=No . of observations∈the second group

Weighted Arithmetic mean

There may be cases where relative importance of the different
observations is not the same. In such cases we compute weighted
arithmetic mean by using following formula.

XW =
∑ WX
∑W
Where X W represents the weighted arithmetic mean. X = the variable
and W = weights attached to the variable X .
The term weight refers the relative importance of the different
observations. The weights may be either actual or arbitrary, i.e.
estimated. However weights are generally given in the problems but in
situations, where no weights are given, the weights are assigned
keeping in view the relative importance of the observations.

(B) Geometric Mean: Geometric mean is defined as the Nth root of the
product of N observations of a given data. If there are two observations
we take square root, three observations, we take cube root and so on.
Symbolically,,
G . M .= √ X 1 × X 2 × X 3 × … … … X N
N

Where X 1 , X 2 , X 3 … … … X N , refer to the various observations of the data.

When the number of observations are three or more the task of
multiplying the number and of extracting the root becomes quite difficult.
To simplify calculations logarithms are used. Geometric mean is then
calculated as follows:
log X 1+ log X 2 +log X 3 … … … …+ log X N
log GM =
N

¿
∑ log X
N

Or, G . M .= Antilog ( ∑ log X

N )
Calculation of Geometric Mean:
In ungrouped data geometric mean is calculated with the help of the following
formula:

G . M .= A . L . ( ∑ log X
N )
In grouped data for calculating geometric mean first we will find the midpoints
and then apply the following formula:

G . M .= A . L . ( ∑ f log X
N )
Where, X =mid point

Applications of Geometric Mean

Geometric mean is used to find out the average percentage increase
in sales, production population or other economic or business data. This
average is also useful in measuring the growth of population and
calculation of interest (compound) on money as both increase in
geometric progression.
It is theoretically considered to be the best average in the
construction of index numbers.
Harmonic Mean: Harmonic mean is defined as the reciprocal of the
arithmetic mean of the reciprocal of the individual observations.
Symbolically,

N
H . M .=
( X1 + X1 + X1 +… … … … … … .+ X1 )
1 2 3 N

When the number of observations is large, the computation of harmonic

mean as per above formula, becomes very tedious task. To simplify the
calculations, first we obtain the reciprocals of the observations then
apply the formula.
In case of ungrouped data,

N
H . M .=
∑( X)
1

In case of grouped data.

N
H . M .=
∑ (f . X )
1

Median

Median is also the measure of central tendency which appears in the

middle of the ordered sequence of values or in other words, we can say
that half of the observations in a set of data are lower than it and half of
the observations are greater than it.
The median is called, the positional average as it describes about the
position of an observation in the series of set of data.

Calculation of Median
(i) For ungrouped data
 Arrange the data in ascending or descending order of magnitude.
N +1
Apply the formula to find out Median No .=
2
This No. gives the value of median in the series.

(ii) For ungrouped data

a) Determine the particular class in which value of median lies
N
by using formula
2
b) Calculate cumulative frequencies in the table
c) Apply the formula to find out Median

N
− pcf
2
Median=L+ ×i
f
Where,
L=Lower limit of the median class
p . c . f .=preceding cumulative frequency ¿ the median class
f =frequency of the median class
i=Class inte rval of the median class
Mode
Mode is defined as that value which occurs the maximum number of
times having the maximum frequency.
Graphically, it is the value on the x axis below the peak or highest point.

MODE
In statistics, mode only tells us which single value occurs most often,
therefore it may represent a majority of total population.
Locating Mode in the Distribution

Following are two ways in which mode can be located.

- Locating mode graphically.
- Locating mode mathematically.
In a frequency distribution, the value of mode can be determined
graphically by drawing histogram and frequency polygon.

In histogram method we first draw a histogram and there after draw two
lines diagonally on the inside of model class bar, starting from each
upper corner of the adjacent bar. At the point of intersection of these
two diagonals, we draw a perpendicular live on x axis which gives the
modal value.
Mode can also be determined from frequency polygon in which
perpendicular is drawn on the base from the apex of the polygon and
where it meets the base gives the modal value.

Locating Mode Mathematically

There are several elementary methods of estimating the mode which
are discussed below.
Calculation of Mode in case of ungrouped data
For determining the mode, count the number of observations, the
various values repeat them selves; and the value which occurs the
maximum number of times is the modal value.

Calculation of mode in case of grouped data

f 1−f 0
Z=L+ ×i
2 f 1−f 0−f 2
 ∆1
Or, Z= ×i
∆1 +∆ 2

In case of grouped data any one formulae of the above can be used to
find out mode.

Where Z represents mode.

L=Lower limit of the modal class
f 1=frequency of the modal class
f 0=frequency of the preceding modal class
f 2=frequency of the succeeding modal class
i=¿ modal class
And, Δ1 = Difference between the frequency of
Modal class & pre-modal class.
Δ2 = Difference between the frequency of
Modal class & post modal class.

Application of formula in statistical problems

In statistical problems related to mode, first of all modal group is found
out.
The modal group will be the group having highest frequency there after
the formula will be applied for the calculation of mode.

NOTE:
(i) While determining the mode, it is Important to see that the
class intervals are uniform throughout otherwise the result will
be misleading.
(ii) A distribution may have more than one Mode the distribution
having single mode is called uni-modal and distribution having
more than one mode is called bimodal.
 (iii) In case of distribution bimodal or Uni modal, in order to arrive
at a single value of mode, following formula will be used.

Mode=3 Median−2 Mean

Dispersion / Variation
A measure of variation or Dispersion is designed to state the extent to
which the individual measures differ on an average from the mean.
Vatriation tells the amount of variation, the degree of variation but not
the direction.

Significance of Measuring Variation.

Measures of variation are needed for four basic purposes.

i. To determine the reliability of an average.

ii. To serve as a basis for the control of variability.
iii. To compare two or more series with regard to their variability.
iv. To facilitate the use of other statistical measures.

Properties of a Good Measure of Variation

1. It should be simple to understand.

2. It should be easy to compute.
3. It should be rigidly defined.
4. It should be based on each and every observation of the
distribution.
5. It should be amenable to further algebraic treatment.
6. It should have sampling stability.
7. It should not be unduly affected by extreme observations.

Measures of Variation
Following are important measures of variation / dispersion.
i. Range
ii. Quartile Deviation.
iii. Average / Mean Deviation.
iv. Standard Deviation.
v. Lorenz curve

Range
Range is the simplest method of studying variation. It is defined as the
difference between the value of the smallest observation and the value
of the largest observation included in the distribution.
Symbolically,

Range = L - S

Where,
L = Largest value
S = Smallest value.
The relative measure corresponding to range, called the coefficient of
range and is obtained by applying the following formula.

Coefficient of Range = L - S
L+S

Uses of Range Range is useful in –

 i) Quality Control
ii) Fluctuations in share prices.
iii) Whether forecast.

Inter Quartile Range or Quartile Deviation

Inter-quartile range represents the difference between the third and first
Quartile.
Symbolically,
Interquartile Range=Q3−Q1

Very often the Inter-quartile range is reduced to the form of semi

Interquartile range or quartile deviation by dividing it by 2.

Q 3 −Q1
Q . D .=
2

where Q . D .=Quartile Deviation

Coefficient of Quartile Deviation

The coefficient of Quartile deviation can be calculated by applying
following formula.

Q3−Q1
Coeff . of Q . D .=
Q3 +Q1

Average / Mean Deviation

The mean deviation is also known as the average deviation. As the
name implies, it is the average of absolute amounts by which the
individual items deviate from the mean. While computing mean
deviation we ignore signs.
Symbolically,

MD = ∑ | x |
 n

where, MD = Mean Deviation

|x|= deviation of an item from
Mean/Median ignoring +ve &
- ve signs.
n = total no. of observations.

Coefficient of Average Deviation

Coefficient of Average deviation is calculated by applying following
formula.

A . D.
Coeff . of A . D . Med =
Median

Standard Deviation
The standard deviation concept was introduced by Karl Pearson in
1893. It is measure of how much spread or variability is present in the
sample. It is the square root of the means of square deviations from the
arithmetic mean.
Standard deviation is also known as root mean square Deviation and
denoted by Greek Letter σ
Calculation of Standard Deviation
Ungrouped data -
Standard deviation may be computed by applying any of the following
two methods.
1. By taking deviations from the actual mean; and
2. By taking deviations from assumed mean.
Deviations from actual mean – When deviations are taken from actual
mean, the following formula will be applied:
 σ=
√ ∑ ( X−X )2
N
If we calculate standard deviation without taking deviations, the above
formula can be used after simplification as follows:

√ ∑X
( )
∑X
2 2

σ= −
N N

√ ∑X
2
Or, σ= −( X )
2
N
Deviations from Assumed Mean:
When the actual mean is in fractions, it would be too cumbersome to
take deviations from it and then find squares of these deviations. In
such a case either the mean may be approximated or else the
deviations be taken from assumed mean and the necessary adjustment
be made in the value of standard deviation. The former method of
approximation is less accurate and therefore, invariably in such a case
deviations are taken from assumed mean.
When deviations are taken from assumed mean the following formula
will be applied:

√ ∑d
( )
∑d
2 2

σ= −
N N

Where, d= ( X− A )
Calculation of Standard Deviation
Grouped data –
In grouped frequency distribution, standard deviation can be calculated
by applying by any of the following two methods:
1. By taking deviations from actual mean; and
2. By taking deviations from assumed mean.
Deviations taken from assumed mean:
When deviations are taken from actual mean, the following formula is
used:
 σ=
√ ∑ f ( X− X )2
N
If we calculate standard deviation without taking deviations, then this
formula after simplification can be used and is given by:

√ ∑ fX
( ∑ fX
)
2 2

σ= −
N N

√ ∑ fX
2
Or, σ= −( X )
2
N
Deviations taken from assumed mean-
When deviations are taken from the assumed mean, the following
formula is applied:

√ ∑ fd
( ) ∑ fd
2 2

σ= − ×i
N N
Coefficient of Variation: The corresponding relative measure is known
as the coefficient of variation and was developed by Karl Pearson. It is
used in such problems, where we want to compare the variability of two
or more than two series.
The series having higher coefficient of variation is said to highly variable
or less consistent and the series having lower coefficient of variation is
said to be less variable or highly consistent. The formula for calculation
of coefficient of variation, is as follows –
σ
C . V .= × 100
X
Skewness: The terms skewness refers to lack of symmetry or
departure from symmetry, when a distribution is not symmetrical (or is
asymmetrical) is called a skewed distribution. The measures of
skewness Indicate the difference between the manner in which the
observations are distributed in a particular distribution compared with a
symmetrical (or normal) distribution.
In a symmetrical distribution, the values of mean median and mode are
alike. In a skewed distribution these values differ. If the value of the
mean is greater than the mode skewness is said to be positive. On the
other hand if the value of mode is greater than mean the skewness is
said to be negative.

Measures of skewness-

Skewness can be measured by any of the following three methods :-

(1) Karl Pearson's Coefficient of skewness-
Under this method the formula is –
Mean−Mode
S Kp=
σ

But where mode is ill defined the following formula can be used –

Skp = 3(Mean –
Median)

(2) Bowley's Coefficient of Skewness-

Under this method following formula is used-

Skp = (Q3–Q3)–(Q2–Q1) = Q3+Q1–2Med

(3) Q3–Q1 Q3–Q1

Kelly's Coefficient of Skewness-

Kelly's approach is based on percentiles and deciles under this

approach following formulae are used.
 Skp = P90–2P50+P10 based on
P90–P10 percentiles

Skp = D9–2D5+D1 based on deciles

D9–D1

Kurtosis
Kurtosis in Greek means bulginess. In statistics, Kurtosis refers to
the degree of fitness or Peakedness in the region about the mode of a
frequency curve. If curve is more peaked than the normal curve it is
called "Leptopurtic"; If it is more or flat topped than the normal curve, It
is called "platykurtic" or "flat topped". The normal curve It self is known
as mesokurtic. The concept of Kurtosis is rarely used in analyzing
business data.

Measures of Kurtosis:
Kurtosis is measured by β 2 or its derivative γ 2

μ4
β 2= 2 and γ 2=β 2−3
μ2

For a symmetrical normal distribution the value of β 2=3 or γ 2=0

If the value of β 2> 3curve is more peaked i.e. leptokurtic
β 2< 3curve is more peaked i.e. Platykurtic