Statistics For Bussiness

By:
Dr. (C) Nanik Istianingsih, S.E., M.E.,
C.LMA., C.PR., C.DM
Basics of Statistics
Definition: Science of collection, presentation, analysis, and reasonable
interpretation of data.

Statistics presents a rigorous scientific method for gaining insight into data. For
example, suppose we measure the weight of 100 patients in a study. With so
many measurements, simply looking at the data fails to provide an informative
account. However statistics can give an instant overall picture of data based
on graphical presentation or numerical summarization irrespective to the
number of data points. Besides data summarization, another important task of
statistics is to make inference and predict relations of variables.
A Taxonomy of Statistics
Statistical Description of Data
 Statistics describes a numeric set of
data by its
 Center
 Variability
 Shape
 Statistics describes a categorical set
of data by
 Frequency, percentage or proportion of
each category
Some Definitions
Variable - any characteristic of an individual or entity. A variable can
take different values for different individuals. Variables can be
categorical or quantitative. Per S. S. Stevens…
• Nominal - Categorical variables with no inherent order or ranking sequence
such as names or classes (e.g., gender). Value may be a numerical, but without
numerical value (e.g., I, II, III). The only operation that can be applied to Nominal
variables is enumeration.
• Ordinal - Variables with an inherent rank or order, e.g. mild, moderate, severe.
Can be compared for equality, or greater or less, but not how much greater or
less.
• Interval - Values of the variable are ordered as in Ordinal, and additionally,
differences between values are meaningful, however, the scale is not absolutely
anchored. Calendar dates and temperatures on the Fahrenheit scale are examples.
Addition and subtraction, but not multiplication and division are meaningful
operations.
• Ratio - Variables with all properties of Interval plus an absolute, non-arbitrary
zero point, e.g. age, weight, temperature (Kelvin). Addition, subtraction,
multiplication, and division are all meaningful operations.
Some Definitions
Distribution - (of a variable) tells us what values the variable
takes and how often it takes these values.
• Unimodal - having a single peak
• Bimodal - having two distinct peaks
• Symmetric - left and right half are mirror images.
Frequency Distribution
Consider a data set of 26 children of ages 1-6 years. Then the
frequency distribution of variable ‘age’ can be tabulated as
follows:
Frequency Distribution of Age

Age 1 2 3 4 5 6
Frequency 5 3 7 5 4 2
Grouped Frequency Distribution of Age:
Age Group 1-2 3-4 5-6

Frequency 8 12 6
Cumulative Frequency
Cumulative frequency of data in previous page
Age 1 2 3 4 5 6

Frequency 5 3 7 5 4 2

Cumulative Frequency 5 8 15 20 24 26

Age Group 1-2 3-4 5-6

Frequency 8 12 6

Cumulative Frequency 8 20 26
 Data Presentation
Two types of statistical presentation of data - graphical and numerical.

Graphical Presentation: We look for the overall pattern and for striking
deviations from that pattern. Over all pattern usually described by
shape, center, and spread of the data. An individual value that falls
outside the overall pattern is called an outlier.

Bar diagram and Pie charts are used for categorical variables.

Histogram, stem and leaf and Box-plot are used for numerical variable.
 Data Presentation –Categorical
Variable
Bar Diagram: Lists the categories and presents the percent or count of
individuals who fall in each category.

Figure 1: Bar Chart of Subjects in

Tre atm ent Groups Treatment Frequency Proportion Percent
Group (%)
Nu m ber of Subjects

30
25
1 15 (15/60)=0.25 25.0
20
15 2 25 (25/60)=0.333 41.7
10
5
3 20 (20/60)=0.417 33.3
0 Total 60 1.00 100
1 2 3
Treatm ent Group
 Data Presentation –Categorical
Variable
Pie Chart: Lists the categories and presents the percent or count of
individuals who fall in each category.

Figure 2: Pie Chart of Treatment Frequency Proportion Percent

Subjects in Treatment Groups Group (%)

1 15 (15/60)=0.25 25.0
25% 1 2 25 (25/60)=0.333 41.7
33%
2 3 20 (20/60)=0.417 33.3

3 Total 60 1.00 100

42%
Graphical Presentation –Numerical
Variable
Histogram: Overall pattern can be described by its shape, center,
and spread. The following age distribution is right skewed. The
center lies between 80 to 100. No outliers.

Mean 90.41666667
Figure 3: Age Distribution
Standard Error 3.902649518

16 Median 84
14 Mode 84
Number of Subjects

12 Standard Deviation 30.22979318

10
Sample Variance 913.8403955
8
Kurtosis -1.183899591
6
4 Skewness 0.389872725
2 Range 95
0 Minimum 48
40 60 80 100 120 140 More
Maximum 143
Age in Month
Sum 5425
Count 60
Graphical Presentation –Numerical
Variable
Box-Plot: Describes the five-number summary

Figure 3: Distribution of Age

160
140
120
q1
100 min
80 median
60 max
q3
40
20
0
Box Plot
1
Numerical Presentation
A fundamental concept in summary statistics is that of a central value for a set
of observations and the extent to which the central value characterizes the
whole set of data. Measures of central value such as the mean or median must
be coupled with measures of data dispersion (e.g., average distance from the
mean) to indicate how well the central value characterizes the data as a whole.

To understand how well a central value characterizes a set of observations, let

us consider the following two sets of data:
A: 30, 50, 70
B: 40, 50, 60
The mean of both two data sets is 50. But, the distance of the observations from
the mean in data set A is larger than in the data set B. Thus, the mean of data
set B is a better representation of the data set than is the case for set A.
Methods of Center Measurement
Center measurement is a summary measure of the overall level of
a dataset

Commonly used methods are mean, median, mode, geometric

mean etc.
Mean: Summing up all the observation and dividing by number of
observations. Mean of 20, 30, 40 is (20+30+40)/3 = 30.
Notation : Let x1 , x2, ...xn are n observations of a variable
x. Then the mean of this variable,
n

x1  x2  ...  xn x i
x  i 1
n n
 Methods of Center Measurement

Median: The middle value in an ordered sequence of observations.

That is, to find the median we need to order the data set and then
find the middle value. In case of an even number of observations
the average of the two middle most values is the median. For
example, to find the median of {9, 3, 6, 7, 5}, we first sort the
data giving {3, 5, 6, 7, 9}, then choose the middle value 6. If the
number of observations is even, e.g., {9, 3, 6, 7, 5, 2}, then the
median is the average of the two middle values from the sorted
sequence, in this case, (5 + 6) / 2 = 5.5.

Mode: The value that is observed most frequently. The mode is

undefined for sequences in which no observation is repeated.
Mean or Median
The median is less sensitive to outliers (extreme scores) than the
mean and thus a better measure than the mean for highly skewed
distributions, e.g. family income. For example mean of 20, 30, 40,
and 990 is (20+30+40+990)/4 =270. The median of these four
observations is (30+40)/2 =35. Here 3 observations out of 4 lie
between 20-40. So, the mean 270 really fails to give a realistic
picture of the major part of the data. It is influenced by extreme
value 990.
Methods of Variability Measurement

Variability (or dispersion) measures the amount of scatter in a

dataset.

Commonly used methods: range, variance, standard deviation,

interquartile range, coefficient of variation etc.

Range: The difference between the largest and the smallest

observations. The range of 10, 5, 2, 100 is (100-2)=98. It’s a crude
measure of variability.
 Methods of Variability Measurement
Variance: The variance of a set of observations is the average of the
squares of the deviations of the observations from their mean. In
symbols, the variance of the n observations x1, x2,…xn is

2 ( x1  x ) 2  ....  ( xn  x ) 2
S 
n 1
Variance of 5, 7, 3? Mean is (5+7+3)/3 = 5 and the variance is

(5  5) 2  (3  5) 2  (7  5) 2
4
3 1
Standard Deviation: Square root of the variance. The standard
deviation of the above example is 2.
 Methods of Variability Measurement

Quartiles: Data can be divided into four regions that cover the total
range of observed values. Cut points for these regions are known as
quartiles.
In notations, quartiles of a data is the ((n+1)/4)qth observation of the
data, where q is the desired quartile and n is the number of
observations of data.
The first quartile (Q1) is the first 25% of the data. The second quartile
(Q2) is between the 25th and 50th percentage points in the data. The
upper bound of Q2 is the median. The third quartile (Q3) is the 25% of
the data lying between the median and the 75% cut point in the data.

Q1 is the median of the first half of the ordered observations and Q3 is

the median of the second half of the ordered observations.
 Methods of Variability Measurement
In the following example Q1= ((15+1)/4)1 =4th observation of the data.
The 4th observation is 11. So Q1 is of this data is 11.

An example with 15 numbers

3 6 7 11 13 22 30 40 44 50 52 61 68 80 94
Q1 Q2 Q3
The first quartile is Q1=11. The second quartile is Q2=40 (This is
also the Median.) The third quartile is Q3=61.

Inter-quartile Range: Difference between Q3 and Q1. Inter-quartile

range of the previous example is 61- 40=21. The middle half of the
ordered data lie between 40 and 61.
 Deciles and Percentiles
Deciles: If data is ordered and divided into 10 parts, then cut points
are called Deciles
Percentiles: If data is ordered and divided into 100 parts, then cut
points are called Percentiles. 25th percentile is the Q1, 50th percentile
is the Median (Q2) and the 75th percentile of the data is Q3.

In notations, percentiles of a data is the ((n+1)/100)p th observation

of the data, where p is the desired percentile and n is the number of
observations of data.

Coefficient of Variation: The standard deviation of data divided by it’s

mean. It is usually expressed in percent.

Coefficient of Variation =  100
x
Five Number Summary

Five Number Summary: The five number summary of a distribution

consists of the smallest (Minimum) observation, the first quartile (Q1),
The median(Q2), the third quartile, and the largest (Maximum)
observation written in order from smallest to largest.

Box Plot: A box plot is a graph of the five number summary. The
central box spans the quartiles. A line within the box marks the
median. Lines extending above and below the box mark the
smallest and the largest observations (i.e., the range). Outlying
samples may be additionally plotted outside the range.
Boxplot
Distribution of Age in Month
160
160
140
140
120
120 q1
100 q1
100 min
min
80 median
80 median
60 max
60 max
q3
40 q3
40
20
20
0
0
1
1
Choosing a Summary
The five number summary is usually better than the mean and standard
deviation for describing a skewed distribution or a distribution with
extreme outliers. The mean and standard deviation are reasonable for
symmetric distributions that are free of outliers.

In real life we can’t always expect symmetry of the data. It’s a common
practice to include number of observations (n), mean, median, standard
deviation, and range as common for data summarization purpose. We
can include other summary statistics like Q1, Q3, Coefficient of variation
if it is considered to be important for describing data.
Shape of Data
 Shape of data is measured by
 Skewness
 Kurtosis
Skewness
 Measures asymmetry of data
 Positive or right skewed: Longer right tail
 Negative or left skewed: Longer left tail

Let x1 , x2 ,...xn be n observations. Then,

n
n  ( xi  x ) 3
Skewness  i 1
3/ 2
 n
2
  ( xi  x ) 
 i 1 
Kurtosis
 Measures peakedness of the distribution of
data. The kurtosis of normal distribution is 0.

Let x1 , x2 ,...xn be n observations. Then,

n
n ( xi  x ) 4
Kurtosis  i 1
2
3
 n 2
  ( xi  x ) 
 i 1 
 Summary of the Variable ‘Age’ in
the given data set
Mean 90.41666667 Histogram of Age

Standard Error 3.902649518

10
Median 84
Mode 84

8
Standard Deviation 30.22979318

Number of Subjects

6
Sample Variance 913.8403955
Kurtosis -1.183899591

4
Skewness 0.389872725
Range 95 2

Minimum 48
0

Maximum 143
40 60 80 100 120 140 160
Sum 5425
Age in Month
Count 60
Summary of the Variable ‘Age’ in
the given data set

Boxplot of Age in Month

140
120
Age(month)

100
80
60
Class Summary (First Part)
So far we have learned-

Statistics and data presentation/data summarization

Graphical Presentation: Bar Chart, Pie Chart, Histogram, and Box Plot
Numerical Presentation: Measuring Central value of data (mean,
median, mode etc.), measuring dispersion (standard deviation,
variance, co-efficient of variation, range, inter-quartile range etc),
quartiles, percentiles, and five number summary

Any questions ?