Introduction to Statistics

Statistics is a branch of mathematics that deals with the scientific collection,

organization, presentation, analysis and interpretation of numerical data in order to
obtain useful and meaningful information.

Origin of the “Statistics”

The word statistics is derived from the Latin word “status” or the Italian word
“statista,” and meaning of these words is “political state” or "government."
Shakespeare used the word statist is his drama Hamlet (1602). In the past, statistics
was used by rulers. The application of statistics was very limited, but rulers and kings
needed information about land, agriculture, commerce, populations of their states to
assess their military potential, their wealth, taxation and other aspects of government.

Gottfried Achenwall used the word statistik at a German university in 1749 to mean
the political science of different countries. In 1771 W. Hooper (an Englishman) used
the word statistics in his translation of Elements of Universal Erudition written by
Baron B.F Bieford. In his book, statistics was defined as the science that teaches us
the political arrangement of all the modern states of the known world. There is a big
gap between the old statistics and modern statistics, but old statistics is also used as a
part of present-day statistics.

During the 18th century, English writers used the word statistics in their works, so
statistics has developed gradually during the last few centuries. A lot of work was
done at the end of the nineteenth century.

At the beginning of the 20th century, William S. Gosset developed the methods for
decision making based on small sets of data. During the 20th century, several
statisticians were active in developing new methods, theories and applications of
statistics. These days, the availability of electronics is certainly a major factor in the
modern development of statistics.

2 MAJOR BRANCHES OF STATISTIC

DESCRIPTIVE STATISTICS – A Statistical method concerned with describing the

properties and characteristic of a set of data.

INFERENTIAL STATISTICS – Concerned with the analysis of a sample data

leading to a prediction, inferences or conclusion about the entire population.
STATISTICAL TERM

Data – any quantitative or qualitative information.

Population – refers to the totality of all elements or persons for which one has
interest at a particular time.

Sample – a subset of population. A sample can be collected either randomly or

through systematic methods.

Parameter – any statistical information or attribute taken from the population.

Statistic – any estimate of statistical attributes taken from a sample.

Variable – A specific factor, property or characteristics of a population or sample

which differentiates a sample or group of samples from another group.

Types of Variables

1.) Quantitative Variable - quantitative variable is measured numerically. With

measurements of quantitative variables you can do things like add and subtract, and
multiply and divide, and get a meaningful result. In the previous example, "Age" was
a quantitative variable.

There are two further kinds of quantitative variables:

Discrete Variable - A discrete variable is a quantitative variable with a finite

number of values.

Continuous Variable - can be obtained by measuring objects or attributes.

2.) Qualitative/Categorical variables - These allow for classification based on some

characteristic. With measurements of qualitative/categorical variables you cannot do
things like add and subtract, and multiply and divide, and get a meaningful result. In
the previous example, "Gender" was a qualitative/categorical variable. Gender was
categorized as either male or female.

Kinds of Variables

DEPENDENT - A dependent variable any variable that is being measured.

sometimes called an outcome variable.

INDEPENDENT - An independent variable is any variable that is being

manipulated. sometimes called an experimental or predictor
variable.
 CONTROLLED - A factor in an experiment which must be held constant. For
example, in an experiment to determine whether light makes plants
grow faster, you would have to control for soil quality and water.

Statistics and Statistical Method

Statistical methods are mathematical formulas, models, and techniques that are used
in statistical analysis of raw research data. The application of statistical methods
extracts information from research data and provides different ways to assess the
robustness of research outputs.

Descriptive statistics
A descriptive statistic aims to summarize a sample, rather than use the data to learn
about the population that the sample of data is thought to represent.

Inferential statistics
Statistical inference is the process of using data analysis to deduce properties of an
underlying probability distribution. Inferential statistical analysis infers properties
of a population, for example by testing hypotheses and deriving estimates. It is
assumed that the observed data set is sampled from a larger population. Inferential
statistics can be contrasted with descriptive statistics. Descriptive statistics is solely
concerned with properties of the observed data, and it does not rest on the assumption
that the data come from a larger population.

Terminology and theory of inferential statistics

 Statistics, estimators and pivotal quantities
A statistic is a random variable that is a function of the random sample, but not a
function of unknown parameters. The probability distribution of the statistic, though,
may have unknown parameters.
Consider now a function of the unknown parameter: an estimator is a statistic used to
estimate such function. Commonly used estimators include sample mean, unbiased
sample variance and sample covariance.
A random variable that is a function of the random sample and of the unknown
parameter, but whose probability distribution does not depend on the unknown
parameter is called a pivotal quantity or pivot.

 Null hypothesis and alternative hypothesis

A null hypothesis is a hypothesis that says there is no statistical significance between
the two variables. It is usually the hypothesis a researcher or experimenter will try to
disprove or discredit. An alternative hypothesis is one that states there is a
statistically significant relationship between two variables.
Error
Working from a null hypothesis, two basic forms of errors are recognized:

 Type I errors where the null hypothesis is falsely rejected giving a "false
positive".
 Type II errors where the null hypothesis fails to be rejected and an actual
difference between populations is missed giving a "false negative".

Standard deviation refers to the extent to which individual observations in a sample

differ from a central value, such as the sample or population mean, while Standard
error refers to an estimate of difference between sample mean and population mean.
A statistical error is the amount by which an observation differs from its expected
value, a residual is the amount an observation differs from the value the estimator of
the expected value assumes on a given sample (also called prediction).
Mean squared error is used for obtaining efficient estimators, a widely used class of
estimators. Root mean square error is simply the square root of mean squared error.

 Interval estimation
In statistics, interval estimation is the use of sample data to calculate an interval of
possible (or probable) values of an unknown population parameter, in contrast to
point estimation, which is a single number or value.

 Significance
Statistics rarely give a simple Yes/No type answer to the question under analysis.
Interpretation often comes down to the level of statistical significance applied to the
numbers and often refers to the probability of a value accurately rejecting the null
hypothesis (sometimes referred to as the p-value).
Statistical hypothesis testing is used to determine whether the result of a data set is
statistically significant. This test provides a p-value, representing the probability that
random chance could explain the result. In general, a p-value of 5% or lower is
considered to be statistically significant.

 Exploratory data analysis

Exploratory data analysis (EDA) is an approach to analyzing data sets to summarize
their main characteristics, often with visual methods. A statistical model can be used
or not, but primarily EDA is for seeing what the data can tell us beyond the formal
modeling or hypothesis testing task.
 Characteristics of Statistics
 Statistics are aggregates of facts.
 Statistics are numerically expressed.
 Statistics are affected to a marked extent by multiplicity of causes.
 Statistics are enumerated or estimated according to a reasonable standard of
accuracy.
 Statistics are collected for a predetermined purpose.
 Statistics are collected in a systemic manner.
 Statistics must be comparable to each other.

Function of Statistics
1) To Present Facts in Definite Form
2) Precision to the Facts
3) Comparisons
4) Formulation and Testing of Hypothesis
5) Forecasting
6) Policy Making
7) It Enlarges Knowledge

Limitation of Statistics

(1) Statistics laws are true on average. Statistics are aggregates of facts, so a single
observation is not a statistic. Statistics deal with groups and aggregates only.

(2) Statistical methods are best applicable to quantitative data.

(3) Statistics cannot be applied to heterogeneous data.

(4) If sufficient care is not exercised in collecting, analyzing and interpreting the data,
statistical results might be misleading.

(5) Only a person who has an expert knowledge of statistics can handle statistical data
efficiently.
(6) Some errors are possible in statistical decisions. In particular, inferential statistics
involves certain errors. We do not know whether an error has been committed or not.

Statistics in Business and Management

Many businesses use statistics to evaluate performance. Business statistics involves

aspects of math, management and market research that aid in the decision making
process within a business.

Statistics play an important role in business. A successful businessman must be very

quick and accurate in decision making. He knows that what his customers wants, he
should therefore, know what to produce and sell and in what quantities. Statistics
helps businessman to plan production according to the taste of the costumers, the
quality of the products can also be checked more efficiently by using statistical
methods. So all the activities of the businessman based on statistical information. He
can make correct decision about the location of business, marketing of the products,
financial resources etc.

THE IMPORTANCE OF STATISTICS IN MANAGEMENT DECISION

MAKING

1) Backing Judgements

Basically, statistics helps to provide evidence for your findings. This way you can
make the right decision for your company with a level of certainty. Having confidence
in business is very important. You will always need evidence to back up your point or
else how will people know what you are saying is accurate.

2) Making Connections

Did you know that statistics can help you make connections? By connection I mean
provide a link between two variables. Making connections can help lead to customer
satisfaction. What I mean by this is that you will know what product or service
pleases the customer more and this will help you make connections.

3) Ensuring Quality
Through the help of statistics, we will know how much to buy so that we don’t waste
money. This way we could control production.

Distrust in Statistics
1.) Figures may be incomplete, inaccurate and deliberately manipulated.

2.) Statistics can prove whatever it wants.

3.) Statistics are tissues of falsehood.

Remedies to Remove Distrust

(i) Consideration of Statistical Limitations: While making use of statistics, limitations

of statistics must be taken care of, for instance, statistics should be homogeneous.

(ii) No Bias: Researcher should be impartial. He should make use only of proper data
and draw conclusions without any bias or prejudice.

(ii) Application by Experts: Statistics should be used only by the experts. If they use
it carefully and scientifically, the possibilities of errors will be little.