Elements of Statistics and Probability

Lecture 3
Descriptive Measures: Mean

Dipu Ray
Adjunct Lecturer

BRAC University

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 Contents

1 Descriptive Measures

2 Measures of Center

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 Descriptive Measures

Numbers that are used to describe the data sets.

One important distribution aspect is where its center is located.

A second aspect of a distribution is how spread out it is.

The third aspect of a distribution is its shape.

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 Measures of Center

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 Measures of Center

It aims to provide an accurate description of the entire data.

A descriptive measure where the center or most typical value of a

data set lies.

The three most important measures of center:

1 Mean
2 Median
3 Mode

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 Mean

The most commonly used measure of center.

Types of Mean
Arithmetic Mean: Mostly used as a central tendency.

Geometric Mean

Harmonic Mean

Weighted Mean

Trimmed Mean

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 Arithmetic Mean

The arithmetic mean of a data set is the sum of the observations divided
by the number of observations.
Calculating Mean from Ungrouped Data
PN
i=1 xi
Mean for population data: µ = N
Pn
i=1 xi
Mean for sample data: x̄ = n

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 Example

1 The following are the ages (in years) of all eight employees of a small
company: 53, 32, 61, 27, 39, 44, 49, and 57. Find the mean age of
these employees.

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 Calculating Arithmetic Mean

Calculating Mean from Grouped Data

P
fi x i
x̄ = P
fi

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 Properties of Arithmetic Mean

A set of data has only one mean. The mean is unique.

All the values are included in computing the mean.

The mean is a useful measure for comparing two or more populations.

The arithmetic mean is the only measure of central tendency where

the sum of the deviations of each value from the mean will always be
zero.

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 Limitations of Arithmetic Mean

When mean is not the best measure of central tendency?

⋆ Heavily influenced by outliers.

Cannot be used in case of qualitative data.

It can not be located graphically.

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 Trimmed Mean

A method of averaging that removes a small designated percentage of

the largest and smallest values before calculating the mean.

Eliminates the influence of outliers or data points on the tails that

may unfairly affect the traditional mean.

Best suited for data with large, erratic deviations or extremely skewed
distributions.

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 Example

The May 1, 2009 issue of The Montclarian reported the following home
sale amounts for a sample of homes in Alameda, CA that were sold the
previous month (1000s of $):
590 815 575 608 350 1285 408 540 555 679
1 Calculate and interpret the sample mean.
2 Calculate a 20% trimmed mean by first trimming the two smallest
and two largest observations.

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 Geometric Mean

Trying to calculate average growth rate, when growth is determined

by multiplication, not addition.

We conduct arithmetic mean when observation are independent to

each other and perform geometric mean when observations are
dependent to each other.

Economics, interest rates, financial transactions etc.

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 Continue...

For a set of observations x1 , x2 , ..., xn ; (xi > 0, i = 1, 2, ..., n) we can

calculate the geometric mean as,

1
GM = (Πni=1 xi ) n

Example: The geometric mean is useful for assessing the performance

of investments that compound over time. Consider an investment
that generates returns of 10%, -5%, and 15% over three years.

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 When to use Geometric Mean

Use the geometric mean when dealing with multiplicative

relationships or exponential growth.

Calculate the average growth rate or compound annual growth rate.

Handle skewed distributions or data with outliers more effectively

than the arithmetic mean.

The geometric mean is not suitable for data that includes zero or
negative values since these would result in undefined or complex
values

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 Harmonic Mean

When dealing with data involving rates or ratios, such as speed,

efficiency, or price-earnings ratios.

Harmonic mean gives less weightage to the large values and large
weightage to the small values to balance the values correctly.

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 Continue...

For a set of observations x1 , x2 , ..., xn ; (xi > 0, i = 1, 2, ..., n), the

following is the formula for the Harmonic mean,

n
HM = Pn 1
i=1 xi

Example: If an investor has three investments with holding periods of

1, 2, and 3 years and annual returns of 10%, 15%, and 20%,
respectively, the harmonic mean holding period would be:

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 When to use Harmonic Mean

Use the harmonic mean when dealing with rates, ratios, or inversely
proportional quantities.

Calculate the average speed or velocity over a given distance.

Give more weight to lower values and balance the contributions of

different rates.

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 Weighted Average

Takes into account the relative importance or weight of each value in

a dataset.

All the probabilities or weights must be mutually exclusive and

exhaustive.

It’s a special case of the arithmetic mean.

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 Example

Item Weights Grade

Attendance 5% 80%
Assignment 15% 70%
Midterm Exam 30% 85%
Final Exam 50% 75%

Table: Weights and grades of different assesments

What is the final grade that the student achieved?

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 Exercise

1 A boat travels upstream from B to A at a speed of 25 km/hour and

down stream from A to B at a speed of 35 km/hour. What is the
average speed of the boat?
2 Riyan stock grows by 10% in year one, unforunately declines by 20%
in year two, and successfully then grows by 30% in year three.
Calculate the average growth rate of Riyan stock.

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