Antim Prahar

The MOST Important

Questions
By
Dr. Anand Vyas
1 Meaning, Scope, functions and Limitations of Statistics
• Meaning of Statistics: Statistics is a branch of mathematics that deals with the collection,
analysis, interpretation, presentation, and organization of numerical data. It provides
methods and techniques for making inferences and decisions in the face of uncertainty.
Statistics is widely used in various fields such as economics, business, medicine, social
sciences, engineering, and more.
• Scope of Statistics:
• Descriptive Statistics: Involves the organization, summarization, and presentation of data
using measures such as mean, median, mode, standard deviation, etc.
• Inferential Statistics: Concerned with making predictions, generalizations, or inferences
about a population based on a sample of data.
• Probability: Statistics often involves concepts from probability theory, especially in
inferential statistics where uncertainty plays a significant role.
• Statistical Methods: Includes various techniques such as hypothesis testing, regression
analysis, analysis of variance (ANOVA), and more, used for data analysis and
interpretation.
• Applications: Statistics finds applications in diverse fields such as business, economics,
sociology, psychology, medicine, engineering, and environmental science.
• Functions of Statistics:
• Data Collection: Statistics helps in collecting relevant data through
various methods such as surveys, experiments, and observations.
• Data Analysis: It provides techniques for organizing, summarizing, and
analyzing data to extract meaningful insights.
• Inference: Statistics enables making predictions and drawing
conclusions about populations based on sample data.
• Presentation: It helps in presenting data in a meaningful and
comprehensible manner through tables, charts, graphs, and summary
statistics.
• Decision Making: Statistics assists in making informed decisions by
providing quantitative information about the likelihood and impact of
different alternatives.
• Limitations of Statistics:
• Sampling Errors: Results obtained from a sample may not accurately
represent the entire population due to sampling errors.
• Measurement Errors: Inaccuracies in data collection methods or
instruments can lead to measurement errors, affecting the reliability
of statistical analysis.
• Assumptions: Statistical methods often rely on certain assumptions
about the data, and violations of these assumptions can lead to
biased or misleading results.
• Misinterpretation: Statistics can be misinterpreted or manipulated to
serve specific agendas, leading to incorrect conclusions.
• Limited Scope: Statistics may not capture all relevant aspects of a
phenomenon, especially qualitative or non-quantifiable factors.
2 What do you mean by central tendency? Describe the
methods of measuring the central tendency.
• Central tendency refers to a statistical measure that identifies the
central or typical value within a dataset. It provides a summary of the
central position or the most representative value around which the
data points tend to cluster. Central tendency is essential for
understanding the distribution of data and making comparisons
between different sets of data.
• There are several methods for measuring central tendency, each
offering different insights into the characteristics of the data. The
most commonly used measures of central tendency include the
mean, median, and mode.
• Mean: The mean, also known as the average, is calculated by
summing up all the values in the dataset and dividing by the total
number of values. Mathematically,
• The mean is sensitive to extreme values, also known as outliers,
which can skew its value, especially in datasets with asymmetrical
distributions.
• Median: The median is the middle value in a dataset when the values
are arranged in ascending or descending order. If the dataset has an
odd number of values, the median is the middle value. If the dataset
has an even number of values, the median is the average of the two
middle values.
• The median is less affected by extreme values compared to the mean,
making it a robust measure of central tendency, especially in skewed
distributions.
• Mode: The mode is the value that appears most frequently
in a dataset. A dataset may have one mode (unimodal), two
modes (bimodal), or more than two modes (multimodal). If
all values occur with the same frequency, the dataset is said
to have no mode.
• The mode is useful for categorical or nominal data but may
not be suitable for continuous data with many unique values.
3 Time Series Analysis: Concept, Additive and
Multiplicative Models
• Time series analysis is a statistical technique used to analyze and interpret data
points collected over a period of time. It involves studying the patterns, trends,
and behaviors exhibited by the data over time. Time series data can be found in
various fields such as economics, finance, weather forecasting, and engineering,
among others.
• Concept of Time Series Analysis: Time series analysis involves several steps:
• Data Collection: Collecting data points at regular intervals over time.
• Visualization: Plotting the data to observe any trends, patterns, or seasonal
variations.
• Modeling: Fitting mathematical models to the data to describe and predict its
behavior.
• Analysis: Analyzing the model to understand the underlying patterns and make
forecasts or predictions.
• Time series analysis can help in understanding historical trends, forecasting
future values, identifying anomalies, and making data-driven decisions.
• Additive Model: An additive model decomposes a time series into several
components, typically:
• Trend: Represents the long-term movement or directionality of the data. It
captures the overall increasing or decreasing pattern over time.
• Seasonality: Represents the periodic fluctuations or variations that occur at
regular intervals within the data, such as daily, weekly, or monthly patterns.
• Residuals (Error): Represents the random fluctuations or noise in the data that
cannot be explained by the trend or seasonality.
• Mathematically, an additive model can be represented as: Yt​=Tt​+St​+εt​ where:
• Yt​ represents the observed value at time t,
• Tt​ represents the trend component at time t,
• St​ represents the seasonal component at time t,
• εt​ represents the error term or residuals at time t.
• In an additive model, the components are added together to reconstruct the
original time series.
• Multiplicative Model: A multiplicative model also decomposes a time
series into components, but the components are multiplied together
instead of being added: Yt​=Tt​×St​×εt​ where the components have the
same meanings as in the additive model.
• In a multiplicative model, the components are multiplied together to
reconstruct the original time series.
• Differences between Additive and Multiplicative Models:
• Nature of Components: In additive models, the components are
added together, while in multiplicative models, the components are
multiplied together.
• Relative Magnitudes: In additive models, the magnitudes of the
components remain constant over time, while in multiplicative
models, the magnitudes of the components may vary proportionally
with the level of the series.
• Application: Additive models are typically used when the magnitude
of seasonality does not depend on the level of the series, while
multiplicative models are used when the magnitude of seasonality
increases or decreases with the level of the series.
4 What is probability? Explain the calculation of
probability under the classical approach. What is
Poisson Distribution? How it is calculated? Define
its characteristics
• Probability: Probability is a measure quantifying the likelihood of an event occurring. It is
expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.
Probability theory provides a mathematical framework for analyzing uncertain events and making
predictions based on available information.
• Calculation of Probability under the Classical Approach: The classical approach to probability is
based on the assumption that all outcomes in a sample space are equally likely. In this approach,
the probability of an event E occurring is calculated by dividing the number of favorable outcomes
for event E by the total number of possible outcomes in the sample space.
• Mathematically, the probability of an event E is given by:
=Number of favorable outcomes for Total number of possible outcomes
P(E)=Total number of possible outcomes Number of favorable outcomes for E​
• For example, consider rolling a fair six-sided die. The sample space S consists of the numbers {1, 2,
3, 4, 5, 6}. To calculate the probability of rolling a 3, since there is only one favorable outcome
(rolling a 3) and six possible outcomes, the probability is: (rolling a 3)=16P(rolling a 3)=61​
• Similarly, for other events, you would count the favorable outcomes and
divide by the total number of outcomes.
• Poisson Distribution: The Poisson distribution is a probability distribution
that describes the number of events that occur in a fixed interval of time or
space, given the average rate of occurrence and under certain
assumptions. It is often used to model rare events where the probability of
occurrence is small but the number of possible occurrences is large.
• Calculation of Poisson Distribution: The probability mass function (PMF) of
the Poisson distribution is given by:!P(X=k)=k!e−λ⋅λk​
• Where:
• )P(X=k) is the probability of observing k events,
• e is the base of the natural logarithm (approximately 2.71828),
• λ is the average rate of occurrence of events in the given interval,
• k is the number of events observed,
• !k! denotes the factorial of k.
• Characteristics of Poisson Distribution:
• Discreteness: The Poisson distribution is a discrete probability distribution,
meaning it describes events that occur in distinct, separate units.
• Non-negative Values: The number of events described by the Poisson
distribution is non-negative (0, 1, 2, ...).
• Independence: The occurrence of events in different intervals is assumed
to be independent of each other.
• Memorylessness: The Poisson distribution has the memoryless property,
meaning that the probability of an event occurring in the future is
independent of the past.
• Mean and Variance: The mean and variance of a Poisson distribution are
both equal to the parameter λ, which represents the average rate of
occurrence.
•
5 Baye’s Theorem, Addition and Multiplication Laws
• Bayes' Theorem:
• Bayes' Theorem is a fundamental concept in probability theory that describes
how to update the probability of a hypothesis based on new evidence or
information. It is named after the Reverend Thomas Bayes, an 18th-century
British statistician and theologian.
• Bayes' Theorem is expressed mathematically as follows:
• \[ P(A|B) = \frac{P(B|A) \cdot P(A)}{P(B)} \]
• Where:
• - \( P(A|B) \) is the conditional probability of event \( A \) given event \( B \)
has occurred.
• - \( P(B|A) \) is the conditional probability of event \( B \) given event \( A \)
has occurred.
• - \( P(A) \) and \( P(B) \) are the probabilities of events \( A \) and \( B \)
occurring, respectively.
• Bayes' Theorem allows us to calculate the probability of an event \(
A \) given evidence \( B \), based on our prior knowledge of the
probability of \( A \) and \( B \), and the probability of observing
evidence \( B \) given that \( A \) is true.
• Addition Law:
• The Addition Law in probability refers to two distinct concepts:
• 1. Addition Rule for Disjoint Events (Mutually Exclusive Events):
• If events \( A \) and \( B \) are disjoint (mutually exclusive),
meaning they cannot both occur simultaneously, then the
probability of either event occurring is the sum of their individual
probabilities:
• \[ P(A \cup B) = P(A) + P(B) \]
2. Addition Rule for Non-Disjoint Events:
If events \( A \) and \( B \) are not mutually exclusive, then the probability of either
event occurring is the sum of their individual probabilities minus the probability of
their intersection (the event where both \( A \) and \( B \) occur):
\[ P(A \cup B) = P(A) + P(B) - P(A \cap B) \]
Multiplication Law:
Similar to addition, there are two concepts related to multiplication in probability:
1. Multiplication Rule for Independent Events:
If events \( A \) and \( B \) are independent, meaning the occurrence of one event does
not affect the occurrence of the other, then the probability of both events occurring is
the product of their individual probabilities:
\[ P(A \cap B) = P(A) \times P(B) \]
2. Multiplication Rule for Dependent Events:
If events \( A \) and \( B \) are dependent, meaning the occurrence of one event affects
the occurrence of the other, then the probability of both events occurring is the
product of the probability of the first event and the conditional probability of the
second event given that the first event has occurred:
\[ P(A \cap B) = P(A) \times P(B|A) \]
These laws and Bayes' Theorem provide powerful tools for calculating probabilities and
making inferences in various situations involving uncertainty and random events.
6 What are decision tree? Explain the decision tress
with the help of any example. Decision Tree approach
and its Applications
• The decision tree approach is a predictive modeling technique used in data mining and
machine learning for both classification and regression tasks. It is a graphical
representation of possible solutions to a decision-making problem, where each node
represents a decision, each branch represents an outcome of that decision, and each leaf
node represents a final decision or outcome.
• Components of a Decision Tree:
• Root Node: The topmost node in the tree, representing the initial decision or starting
point.
• Decision Nodes: Intermediate nodes in the tree where decisions are made based on
input features or attributes.
• Branches: Arrows connecting nodes, representing possible outcomes of decisions.
• Leaf Nodes: Terminal nodes in the tree where final decisions or outcomes are reached.
Decision Tree
• Decision Tree may be understood as the logical tree, is a range of
conditions (premises) and actions (conclusions), which are depicted as
nodes and the branches of the tree which link the premises with
conclusions. It is a decision support tool, having a tree-like representation
of decisions and the consequences thereof. It uses ‘AND’ and ‘OR’
operators, to recreate the structure of if-then rules.

• Decision Node: Represented as square, wherein different courses of action

arise from decision node in main branches.
• Chance Node: Symbolised as a circle, at the terminal point of decision
node, the chance node is present, where they emerge as sub-branches.
These depict probabilities and outcomes.
• Decision Tree Construction: The construction of a decision tree
involves selecting the best attribute at each decision node based on
certain criteria, such as information gain (for classification problems)
or reduction in variance (for regression problems). This process
continues recursively until a stopping criterion is met, such as
reaching a maximum tree depth or when further splitting does not
provide significant improvement in prediction accuracy.
• Applications of Decision Trees:
• Classification: Decision trees are commonly used for classification
tasks, where the goal is to assign a class label to input data. Examples
include:
• Predicting whether an email is spam or not spam based on its features.
• Classifying customers into different segments based on their purchasing
behavior.
• Diagnosing medical conditions based on symptoms and test results.
• Regression: Decision trees can also be used for regression tasks, where the
goal is to predict a continuous numeric value. Examples include:
• Predicting house prices based on features such as location, size, and amenities.
• Estimating the demand for a product based on various factors such as price,
advertising expenditure, and seasonality.
• Anomaly Detection: Decision trees can be used for anomaly detection,
where the goal is to identify unusual patterns or outliers in data.
• Feature Selection: Decision trees can help identify the most important
features or attributes in a dataset, which can be useful for feature selection
in other machine learning models.
• Risk Assessment: Decision trees can be used to assess risk in various
domains, such as finance, insurance, and healthcare, by modeling the
likelihood of different outcomes based on input variables.
• Customer Relationship Management: Decision trees can be used to
optimize marketing strategies by identifying the most effective channels
and messages for different customer segments.
7 Relationship between Regression and Correlation
• Regression and correlation are both statistical techniques used to analyze the
relationship between variables. While they are related, they serve slightly
different purposes and provide complementary information about the association
between variables.
• 1. Relationship:
• Regression: Regression analysis is used to model the relationship between a
dependent variable (response variable) and one or more independent variables
(predictor variables). It seeks to estimate the functional form of the relationship
and predict the value of the dependent variable based on the values of the
independent variables.
• Correlation: Correlation analysis measures the strength and direction of the
linear relationship between two continuous variables. It quantifies the degree to
which changes in one variable are associated with changes in another variable.
Correlation does not imply causation but indicates the presence and strength of a
relationship between variables.
• 2. Purpose:
• Regression: Regression analysis is used for prediction, estimation, and inference. It helps in understanding
how changes in one or more independent variables affect the dependent variable. Regression models can be
used for forecasting and hypothesis testing.
• Correlation: Correlation analysis is used to assess the degree of association between variables. It helps in
identifying patterns and trends in data and can be used to screen for potential relationships before
conducting regression analysis. Correlation is also useful for variable selection and identifying
multicollinearity in regression models.
• 3. Output:
• Regression: The output of regression analysis includes the regression equation, which describes the
relationship between variables, as well as estimates of the regression coefficients and their significance.
Regression also provides measures of goodness of fit, such as R-squared, which indicates the proportion of
variance in the dependent variable explained by the independent variables.
• Correlation: The output of correlation analysis includes the correlation coefficient, typically denoted by �r,
which ranges from -1 to 1. A correlation coefficient of 1 indicates a perfect positive linear relationship, -1
indicates a perfect negative linear relationship, and 0 indicates no linear relationship. Correlation analysis
also provides a scatter plot to visualize the relationship between variables.
• 4. Assumptions:
• Regression: Regression analysis assumes a causal relationship between the independent and dependent
variables. It also assumes linearity, homoscedasticity (constant variance of errors), independence of errors,
and normality of errors.
• Correlation: Correlation analysis assumes linearity and bivariate normality (normal distribution of each
variable and their joint distribution). It is less restrictive than regression analysis and does not imply
causality.
8 Correlation Karl Pearson's and Spearman's
Rank Correlation
Karl Pearson’s Coefficient of Correlation is widely used mathematical
method wherein the numerical expression is used to calculate the
degree and direction of the relationship between linear related
variables.

Spearman rank correlation is a non-parametric test that is used to

measure the degree of association between two variables. The
Spearman rank correlation test does not carry any assumptions about
the distribution of the data and is the appropriate correlation analysis
when the variables are measured on a scale that is at least ordinal.
 Karl
Pearson's
Correlation

Spearman's
Rank
Correlation
9 Regression
• Regression is a statistical measurement used in finance, investing and
other disciplines that attempts to determine the strength of the
relationship between one dependent variable (usually denoted by Y)
and a series of other changing variables (known as independent
variables).
10 Probability (Card & Ball Question)
• In our day to day life the “probability” or “chance” is very commonly
used term. Sometimes, we use to say “Probably it may rain
tomorrow”, “Probably Mr. X may come for taking his class today”,
“Probably you are right”. All these terms, possibility and probability
convey the same meaning. But in statistics probability has certain
special connotation unlike in Layman’s view.

• Addition and Multiplication Laws

11 Mean, Median Mode
• MEAN (ARITHMETIC)
• The mean (or average) is the most popular and well known measure of central tendency.
It can be used with both discrete and continuous data, although its use is most often
with continuous data (see our Types of Variable guide for data types). The mean is equal
to the sum of all the values in the data set divided by the number of values in the data
set. So, if we have n values in a data set and they have values x1, x2, …, xn, the sample
mean, usually denoted by (pronounced x bar), is:

• MEDIAN
• The median is the middle score for a set of data that has been arranged in order of
magnitude.

• MODE
• The mode is the most frequent score in our data set. On a histogram it represents the
highest bar in a bar chart or histogram. You can, therefore, sometimes consider the
mode as being the most popular option
12 Fisher Index Number
• Fisher's method is a way of combining the information in the p-values
from different statistical tests so as to form a single overall test: this
method requires that the individual test statistics (or, more
immediately, their resulting p-values) should be statistically
independent.
• Fisher's method is considered the most ideal because it uses both
prices and quantities of base and current period and is based on
geometric mean.
13 Mean Deviation & Standard Deviation
• Mean Deviation
• To understand the dispersion of data from a measure of central
tendency, we can use mean deviation. It comes as an improvement
over the range. It basically measures the deviations from a value. This
value is generally mean or median. Hence although mean deviation
about mode can be calculated, mean deviation about mean and
median are frequently used.

• Standard Deviation
• As the name suggests, this quantity is a standard measure of the
deviation of the entire data in any distribution. Usually represented
by s or σ. It uses the arithmetic mean of the distribution as the
reference point and normalizes the deviation of all the data values
from this mean.
14 Skewness Meaning and Types
• Skewness, in statistics, is the degree of distortion from the
symmetrical bell curve, or normal distribution, in a set of data.
Skewness can be negative, positive, zero or undefined. A normal
distribution has a skew of zero, while a lognormal distribution, for
example, would exhibit some degree of right-skew.
•The three probability distributions depicted below depict increasing
levels of right (or positive) skewness. Distributions can also be left
(negative) skewed. Skewness is used along with kurtosis to better judge
the likelihood of events falling in the tails of a probability distribution.