Chapter 13

Measurement and
Scaling Concepts

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copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
 Operational Definitions (cont’d)
• Variable
Anything that varies or changes from one instance to
another; can exhibit differences in value, usually in
magnitude or strength, or in direction.
Capture different values of a concept.
• Constructs
Concepts measured with multiple variables.

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–2
 Levels of Scale Measurement
• Nominal
Assigns a value to an object for identification or
classification purposes.
Most elementary level of measurement.
• Ordinal
Ranking scales allowing things to be arranged based
on how much of some concept they possible.
Have nominal properties.

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–3
 Levels of Scale Measurement (cont’d)
• Interval
Capture information about differences in quantities of
a concept.
Have both nominal and ordinal properties.
• Ratio
Highest form of measurement.
Have all the properties of interval scales with the
additional attribute of representing absolute
quantities.
Absolute zero.

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–4
 EXHIBIT 13.4 Nominal, Ordinal, Interval, and Ratio Scales Provide Different Information

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–5
 EXHIBIT 13.5 Facts About the Four Levels of Scales

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–6
 Mathematical and Statistical Analysis of
Scales
• Discrete Measures
Measures that can take on only one of a finite number
of values.
• Continuous Measures
Measures that reflect the intensity of a concept by
assigning values that can take on any value along
some scale range.

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copied or duplicated, or posted to a publically accessible website, in
whole or in part. 13–7
 Binary Variable (New variable)
A binary variable is a variable that can only take on one of two possible
values, often represented as 0 or 1, True or False, or Yes or No, and is a
type of categorical variable/Qualitative variable. Examples:
• Gender (Male/Female)
• Yes/No questions
• True/False statements
• Pass/Fail
• Success/Failure

Nicknames
• Dichotomous variable: Another term for binary variable
• Categorical variable: Binary variables are a type of categorical variable
• Dummy variable: A binary variable used in regression analysis
 Cross-sectional Data

Cross-sectional data refer to observations of many different

individuals (subjects, objects) at a given time, each observation
belonging to a different individual. A simple example of
cross-sectional data is the gross annual income for each of 1000
randomly chosen households in New York City for the year
2000. Cross-sectional data are distinguished from longitudinal
data, where there are multiple observations for each unit, over
time.
 Cross-sectional data
This is the type of data that is collected about individuals (people, countries,
plants, etc.) over a single period of time or over various points in time where no
special attention is paid to the time element. Data can be collected using
sampling approaches or from historical data sources.

retur
1990 retur =1 if
1990 % n on % =1 if =1 if
firm n on =1 if transp natural natural
salary, change equit chang indus consume
sales, firm's financia ort. or log of log of
thous salary, y, e roe, trial r product
million stock, l firm utilitie salary sales
ands $ 89-90 88-90 88-90 firm firm
s$ 88-90 s
avg

salary pcsalary sales roe pcroe ros indus finance consprod utility lsalary lsales
1095 20 27595 14.1 106.4 191 1 0 0 0 6.998 10.22
1001 32 9958 10.9 -30.6 13 1 0 0 0 6.908 9.206
1122 9 6125.9 23.5 -16.3 14 1 0 0 0 7.022 8.720
578 -9 16246 5.9 -25.7 -21 1 0 0 0 6.359 9.695
 Time-series data

• A time series is a data set that tracks a sample

over time.
• In particular, a time series allows one to see what
factors influence certain variables from period to
period.
• Time series analysis can be useful to see how a
given asset, security, or economic variable
changes over time.
• Forecasting methods using time series are used in
both fundamental and technical analysis.
 Time-series data
This type of data is explicitly organized in time sequence, generally in
equally spaced units such as days, weeks, months, quarters, years, etc.

Stock Price of a
Year company
2015 56
2016 57
2017 58
2018 59
2019 60
2020 61
2021 62
2022 63
2023 64
2024 65
Here, data are presented for a single individual in time sequence order
with one row of data for each year. Each row consists of the
characteristics under study for that year.
 Panel Data/ Longitudinal

A panel data set contains observations on a number of units

(e.g. subjects, objects) belonging to different clusters (panels)
over time.
• A simple example of panel data is the values of the gross
annual income for each of 1000 households in New York City,
200 from each of the 5 boroughs collected for each of 10
years from 1991 to 2000. in this example, the boroughs are
the clusters (panels).
 Panel (Longitudinal) data

Panel data consists of time-series data for each cross-sectional individual.

Once again, individuals can be people, cities, companies, plants, etc. and
time can be years, months, weeks, etc.

Observation Year stock price profit No. of EmployeesMale/FemaleAge

1 2015 56 100 25 0 25
2 2016 57 200 30 0 25
3 2017 58 300 35 0 25
4 2018 59 400 40 0 26
5 2019 60 500 45 0 27
6 2020 61 600 50 1 25
7 2021 62 700 55 1 6
8 2022 63 800 60 1 28
9 2023 64 900 65 1 30
10 2024 65 1000 70 1 21
Application in SPSS/Stata

Factors Affecting CEO Salary