MGS2150

Business Statistics and Application

Lecture 1 Data and Statistics

 Important Issues

• Contact
– Tel: 0577-55870980; [email protected]
– Office: CBPM B-1M09
– Office hours: Monday/Wednesday 10:00-11:30 PM; Thursday 3:30-5:30 PM

• Course Assessment
Componentes Points
Class Participation 10
Assignments 12
Lab Exercises 20
Exam 1 23
Exam 2 35
Total 100

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 Important Issues (cont’d)

• Class Participation (10%)

– Attendance checks will be conducted throughout the semester.
– Missing one class will result in a two-point deduction from the student’s total
score. Missing more than five classes will automatically result in failure of the
class.
– Students who cannot attend a class or need to switch sections must provide a
valid reason.
– Active participation in all class discussions and activities is strongly
encouraged.

• Lab Exercises (20%)

– Complete the lab exercise and submit your work through Canvas before the
deadline.

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 Important Issues (cont’d)

• Assignments (12%)
– Three take-home assignments (Canvas)
– The due date for each assignment will be announced upon its release on
Canvas.
– Late submission penalty: 20% of the total points for that assignment will be
deducted for each day it is overdue.
– Any assignment submitted more than three days after the due date will not be
graded and will automatically receive a zero.

• Exam 1 (23%) & Exam 2 (35%)

– Restricted open-book examination: You are only allowed to bring into the
exam hall ONE A4-size paper of formulas and notes.

• For more comprehensive information, please refer to the detailed course

syllabus available on Canvas.
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 Course Materials
• Textbook
– David R. Anderson, Dennis J. Sweeney, James J. Cochran,
Jeffrey D. Camm, Thomas A. Williams (2018). Essentials of
Modern Business Statistics with Microsoft Office Excel (7th ed.).
Mason OH: Cengage Learning

• Lecture Notes & Tutorial Questions

• Course Website (Canvas)

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Course Outline

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 Why Study Statistics

• Data are collected everywhere and require statistical

knowledge to make the information useful.
– Example: Google records every search and then uses these data to sort
and prioritize the results for future internet search.

• Statistics is used to make valid comparisons and to predict the

outcomes of decisions.

• Statistical knowledge is useful in any career.

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 Example

• The number of environmental & social publications is about four per year between
2009 and 2019 and then increases drastically to 15 in 2020 and 24 in 2021 because
of efforts by journals to promote research in sustainable finance.

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 Introduction

• The term statistics refers to numerical facts such as averages,

medians, percentages, and maximums that help us understand a
variety of business and economic situations.

• Statistics can also refer to the art and science of collecting,

organizing, presenting, analyzing, and interpreting data to assist in
making more effective decisions.

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 Applications in Business and Economics

• Accounting: public accounting firms use statistical sampling procedures

when conducting audits for their clients.
• Economics: economists use statistical information in making forecasts
about the future of the economy or some aspect of it.
• Finance: financial advisors use price-earnings ratios and dividend yields to
guide their investment advice.
• Marketing: electronic point-of-sale scanners at retail checkout counters
are used to collect data for a variety of marketing research applications.
• Production: a variety of statistical quality control charts are used to
monitor the output of a production process.
• Information Systems: a variety of statistical information helps
administrators assess the performance of computer networks.

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 Data
• Data are the facts and figures collected, analyzed, and summarized
for presentation and interpretation.

• A data set consists of all the data collected for a particular study.

• Elements are the entities on which data are collected.

• A variable is a characteristic of interest for the elements.

• An observation is the set of measurements obtained for a particular

element.

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 Example: Data Set for 60 Nations in the World Trade
Organization

WTO Per Capita Fitch Fitch An observation

Nation
Status GDP (S) Rating Outlook
Armenia Member 4,267 B+ Stable
Australia Member 51,812 AAA Negative
Austria Member 48,328 AA+ Stable
Azerbaijan Observer 4,214 BB+ Stable
Bahrain Member 28,608 B+ Stable

• Each nation listed in this Table is an element. With 60 nations, the data set
contains 60 elements.
• The data set includes five variables: Nation, WTO Status, Per Capita GDP (S), Fitch
Rating, and Fitch Outlook.
• Observation #2 (Australia) contains the measurements: Member, 51,812, AAA, and
Negative.

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 Scales(Levels) of Measurement

• Data collection requires one of the following scales of

measurement: nominal, ordinal, interval, or ratio.

• The scale of measurement determines the amount of

information contained in the data and indicates the most
appropriate data summarization and statistical analyses.

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 Nominal Scale

• Nominal scale: the data are labels or names used to identify an

attribute of the element. They have no order.
• They can only be classified and counted.
• Examples:
– the WTO Status variable :“Member” and “Observer” are
labels used to identify the status category for a nation.
– Classifying M&M candies by color.

• A numeric code may also be used. For example, we could use the
label “1” to identify a “Member” status category and “2” to
identify an “Observer” status category.
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 Ordinal Scale

• Ordinal scale: the data have the properties of nominal data,

and the order or rank of the data is meaningful.

• Variables based on this level of measurement are only ranked

and counted.

• Example: Fitch Rating variable: the labels, which range from

AAA to F, are rank-ordered by credit rating.

• Ordinal data can also be recorded by a numerical code, such

as a student’s class rank, the top 100 most expensive cities.

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 Interval Scale

• Interval scale: the data have the properties of ordinal data,

and the interval between observations is expressed in terms
of a fixed unit of measure.

• Interval data are always numerical.

• The differences between the values are meaningful.

• Example: temperature scale

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 Ratio Scale

• Ratio scale: the data have the properties of interval data, and
the ratio of two values is meaningful.
• Example: variables such as distance, height, weight, and
wages use the ratio scale of measurement.

• The ratio scale of measurement requires that a zero value be

included to indicate that nothing exists for the variable at the
zero point.
– If you have zero dollars, then you have no money. A wage of $50 per
hour is two times the wage of $25 per hour.

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 Examples: What is the scale of measurement for each
of the following variables?

a. Distance students travel to class.

b. A student’s city of birth.

c. A student’s academic class – that is, freshman, sophomore,

junior, or senior.

d. Number of hours students study per week.

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 Types of Data

• Data can be classified as categorical or quantitative.

• Categorical data: Data that can be grouped by specific categories.
• Categorical data use either the nominal or ordinal scale of
measurement.
• A categorical variable is a variable with categorical data.
– Classifying M&M candies by color.

• Statistical analyses are rather limited.

• We can summarize categorical data by:
• counting the number of observations in each category
• computing the proportion of the observations in each category

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 Types of Data (cont’d)

• Quantitative data: Data that use numeric values to indicate

how much or how many.

• Quantitative data are obtained using either the interval or

ratio scale of measurement.

• More alternatives for statistical analysis are possible when

data are quantitative

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 Types of Data (cont’d)

Data

Categorical Quantitative

Non-
Numeric Numeric
numeric

Nominal Ordinal Nominal Ordinal Interval Ratio

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 Types of Data: Example

• A newspaper subscriber survey asked 46 questions about subscriber

characteristics and interests. State whether each of the following
questions provides categorical or quantitative data.

1. What is your age?

2. Are you married?
3. How long have you been in your present job or position?
4. What type of vehicle are you considering for your next purchase? Nine
response categories include sedan, sports car, SUV, minivan, and so on.

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 Cross-Sectional Data

• Cross-sectional data: data collected at the same or approximately

the same point in time.

– Example: The data in the previously shown Nations data file are cross-
sectional because they describe the five variables for the 60 WTO
nations at the same point in time.

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 Time Series Data

• Time series data: data collected over several time periods.

This figure presents the global search

interest relative to the highest point on
the chart for the period
from 2004 to May 2022.
A value of 100 represents the peak
popularity for the term searched.

• Graphs of time series help analysts understand

– what happened in the past,
– identify any trends over time, and
– project future values for the time series
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 Types of Variables

• Quantitative variables can be discrete or continuous.

• Discrete variables are typically the result of counting.

– Values have “gaps” between the values.
– Examples: The number of bedrooms in a house (1, 2, 3, 4, etcetera),
the number of students in a statistics course (25, 30, etcetera).

• Continuous variables are usually the result of measuring

something.
– Can assume any value within a specific range.
– Examples: Duration of flights from Wenzhou to Hong Kong (2 hours),
grade point average (3.755).

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 Types of Statistics

• There are two types of statistics: descriptive and inferential.

• Descriptive Statistics: Methods of organizing, summarizing, and
presenting data in an informative way
– tabular, graphical, or numerical
• Examples: The variable Fitch Outlook in the WTO Nations table can be
summarized as a table or bar chart.
• Numerical descriptive statistics such as the mean.

Fitch Outlook Frequency Percent Frequency (%)

Positive 3 5.0
Stable 39 65.0
Negative 18 30.0

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 Inferential Statistics

• When the collection of information about a large group of elements

(voters, households, customers, etc.) is not feasible because of time, cost,
and other considerations, data can be collected from only a small portion
of the group.
• Inferential Statistics: The process of using data obtained from a sample to
make estimates and test hypotheses about the characteristics of a
population
– Example: Use a survey of 439 institutional investors to show that institutional
investors incorporate climate risk into investment decisions.
• Population: the set of all elements of interest in a particular study
– Census: the process of collecting data for the entire population
– The U.S. government conducts a census every 10 years.
• Sample: a subset of the population

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 Inferential Statistics -Example

• Rogers Industries has developed a new solid-state lithium battery.

• Researchers want to evaluate the advantages of the new battery

using statistical inference.

• The population is defined as all lithium batteries that could be

produced using the new solid-state technology.

• To evaluate the advantages of the new battery, a sample of 200

batteries manufactured with the new solid-state technology were
tested.

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The Rogers Industries Example

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 Data Sources

• Data can be obtained from existing sources, by conducting an

observational study, or by conducting an experiment.

• Existing Sources
– Internal company records – almost any department
– Business database services – Bloomberg
– Government agencies - U.S. Department of Labor
– Industry associations – Travel Industry Association of America
– Special-interest organizations – Graduate Management Admission
Council (GMAT)
– Internet – Company Websites; Google

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 Data Sources (Cont’d)

• Data Available From Internal Company Records

Record Some of the Data Available

Employee records Name, address, social security number
Production Part number, quantity produced, direct labor cost, material cost
records
Inventory records Part number, quantity in stock, reorder level, economic order quantity
Sales records Product number, sales volume, sales volume by region
Credit records Customer name, credit limit, accounts receivable balance
Customer profile Age, gender, income, household size

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 Data Sources (Cont’d)

• Data Available From Selected Government Agencies

Government Agency Some of the Data Available

Census Bureau Population data, number of households, household income

Federal Reserve Board Data on money supply, exchange rates, discount rates

Office of Mgmt. & Budget Data on revenue, expenditures, debt of federal government

Department of Data on business activity, value of shipments, profit by industry

Commerce
Bureau of Labor Statistics Customer spending, unemployment rate, hourly earnings, safety
record

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 Data Sources (Cont’d)

• Observational Study: no attempt is made to control or

influence the variables of interest
– Simply observe what is happening in a particular situation, record data
on one or more variables of interest

• Examples:
– Studies of smokers and nonsmokers are observational studies because
researchers do not determine or control who will smoke and who will
not smoke.
– Investigate the relationship between the gender of the CEO for a
Fortune 500 company : record the gender of the CEO and the ROE for
each company.

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 Data Sources (Cont’d)

• Experiment: a variable of interest is first identified, and then one or

more other variables are identified and controlled. The collected
data are then analyzed to investigate how they influence the
variable of interest.
• The key difference between an observational study and an
experiment is that an experiment is conducted under controlled
conditions.

• Example – a pharmaceutical company administers different dosages

of a new drug to groups of randomly selected individuals and
monitors how they are affected by it.

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 Data Acquisition Considerations

• Time Requirement
– Searching for information can be time-consuming.
– Information may no longer be useful by the time it is available.

• Cost of Acquisition
– Organizations often charge for information even when it is not their
primary business activity.

• Data Errors
– Using any data that happen to be available.
– Data acquired with little care can lead to misleading information.

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 Statistical Analysis Using Microsoft Excel

• Statisticians often use computer software to perform the statistical

computations required with large amounts of data.
– This course shows how statistical analysis can be performed using
Microsoft Excel.

• This course is about statistics. Our focus is on showing the

appropriate statistical procedures for collecting, analyzing,
presenting, and interpreting data.

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 Data Sets and Excel Worksheets

• Excel Worksheet for the Rogers Industries Data Set

• Cells A1 contain the variable names.

• Cells A2:A202 contain the collected
data.
• Note that rows 7 through 197 have
been hidden to conserve space.

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 Using Excel for Statistical Analysis

• In using Excel for statistical analysis, the following four tasks

may be needed, but not necessarily all of them:
– Enter/Access Data
– Enter Functions and Formulas
– Apply Tools
– Editing Options

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 Excel: AVERAGE and MEDIAN Functions

• Enter/Access Data. Open file rogers.

• Enter Functions and Formulas.
– =AVERAGE(A2:A201)
– =MEDIAN(A2:A201)

• Or insert function dialog box: Formulas → Insert Function

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 Using Excel Add-Ins

• Install the Data Analysis add-in

1. Go to File > Options
2. In the Excel Options dialog box, click Add-ins.
3. In the Manage box, select Excel Add-ins and then click Go.
4. In the Add-Ins box, check Analysis ToolPak, then click OK.

• Accessing Descriptive Statistics

1. Click on the Data tab on the ribbon.
2. Look for the Data Analysis option on the right side of the toolbar. Click it.
3. From the Data Analysis dialog box, select Descriptive Statistics and click OK.

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Using Excel Add-Ins (Cont’d)

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 Analytics

• Analytics is the scientific process of transforming data into insight

for making better decisions.

• It comprise three broad categories of techniques:

– Descriptive analytics describes what has happened in the past.
– Predictive analytics uses models constructed from past data to predict
the future or to assess the impact of one variable on another.
• Examples – linear regression, time series analysis, forecasting
models, and simulation.
– Prescriptive analytics yields the best course of action.
• Examples – optimization models and decision analysis

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 Big Data

• Big data are larger and more complex data sets that cannot be
managed, processed, or analyzed with commonly available
software in a reasonable amount of time.

• Analysts often define big data by referring to the Three V’s:

– Volume: the amount of available data; velocity: the speed at which
data is collected and processed; variety: different data types.
– Wal-Mart captures data on 20-30 million transactions per day.
– Visa processes 6,800 payment transactions per second.

• Data warehousing is the process of capturing, storing, and

maintaining data.

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 Data Mining

• Data mining methods help develop useful decision-making

information from large databases.

• Using a combination of procedures from statistics,

mathematics, and computer science, analysts “mine the data”
to convert it into useful information.

• The most effective data mining systems use automated

procedures to discover relationships in the data and predict
future outcomes.

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 Ethical Guidelines for Statistical Practice

• In a statistical study, unethical behavior can take a variety of forms

including:
– Improper sampling
– Inappropriate analysis of the data
– Development of misleading graphs
– Use of inappropriate summary statistics
– Biased interpretation of the statistical results
• One should strive to be fair, thorough, objective, and neutral in collecting,
analyzing, and presenting data.
• Consumers of statistics should also be aware of the possibility of unethical
behavior by others.

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 Ethical Guidelines for Statistical Practice (Cont’d)

• The American Statistical Association developed the report

“Ethical Guidelines for Statistical Practice”.
• It contains 67 guidelines organized into 8 topic areas:
– Professionalism
– Responsibilities to Funders, Clients, Employers
– Responsibilities in Publications and Testimony
– Responsibilities to Research Subjects
– Responsibilities to Research Team Colleagues
– Responsibilities to Other Statisticians/Practitioners
– Responsibilities Regarding Allegations of Misconduct
– Responsibilities of Employers Including Organizations, Individuals,
Attorneys, or Other Clients

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