Chapter one

1. Introduction

1.1. What is statistics?

Statistics is the science of conducting studies to collect, organize, summarize, analyze, and draw
conclusions from data. Or statistics is the methodology for collecting, analyzing, interpreting and drawing
conclusions from information.

Putting it in other words, statistics is the methodology which scientists and mathematicians have developed
for interpreting and drawing conclusions from collected data.

Terminology
 Population - the entire group of objects that we are interested in.
 Sample - the subset that we actually measure.
 Characteristic - the particular measurement we are interested in.
 Parameter – a value which summarizes the characteristic of the population.
 Statistic – the estimate of the parameter that we make from the sample.

 A variable is a characteristic or attribute that can assume different values. Variables

whose values are determined by chance are called random variables.
 Data are the values (measurements or observations) that the variables can assume.
Variables can be classified as qualitative or quantitative.
 Qualitative variables are variables that can be placed into distinct categories, according
to some characteristic or attribute. For example, if subjects are classified according to
gender (male or female), then the variable gender is qualitative. Other examples of
qualitative variables are religious preference and geographic locations.
 Quantitative variables are numerical and can be ordered or ranked. For example, the
variable age is numerical, and people can be ranked in order according to the value of their
ages. Other examples of quantitative variables are heights, weights, and body
temperatures. Quantitative variables can be further classified into two groups: discrete
and continuous.
 Discrete variables assume values that can be counted. Discrete variables can be assigned
values such as 0, 1, 2, 3 and are said to be countable. Examples of discrete variables are
the number of children in a family, the number of students in a classroom, and the number
of calls received by a switchboard operator each day for a month.
 Continuous variables can assume an infinite number of values between any two specific
values. They are obtained by measuring. They often include fractions and decimals.

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Instructor: Yohannes D (PhD. Cand.)
 Continuous variables, by comparison, can assume an infinite number of values in an
interval between any two specific values.
Temperature, for example, is a continuous variable, since the variable can assume an
infinite number of values between any two given
temperatures.
There are two major types of statistics depending on how data are used.

1. Descriptive statistics
2. Inferential statistics

The branch of statistics devoted to the summarization and description of data is called descriptive
statistics and the branch of statistics concerned with using sample data to make an inference
about a population of data is called inferential statistics.
Descriptive statistics consists of the collection, organization, summarization, and presentation of
data.

Descriptive statistics includes the construction of graphs, charts, and tables, and the calculation
of various descriptive measures such as averages, measures of variation, and percentiles.
Descriptive statistics involves methods of organizing, picturing and summarizing information
from data.

1. Descriptive Statistics
Descriptive statistics is the type of statistics that probably springs to most people’s minds when
they hear the word “statistics.” Here the goal is to describe.
Numerical measures are used to tell about features of a set of data. There are a number of items
that belong in this portion of statistics, such as:
 The average, or measure of center, consisting of the mean, median, mode or midrange.
 The spread of a data set, which can be measured with the range or standard deviation.
 Overall descriptions of data such as the five number summary.
 Other measurements such as skewness and kurtosis.
 The exploration of relationships and correlation between paired data.
 The presentation of statistical results in graphical form.

2. Inferential Statistics

For the area of inferential statistics we begin by differentiating between two groups. The
population is the entire collection of individuals that we are interested in studying. It is typically
impossible or infeasible to examine each member of the population individually. So we choose a
representative subset of the population, called a sample.

Inferential statistics studies a statistical sample, and from this analysis is able to say something
about the population from which the sample came.

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Instructor: Yohannes D (PhD. Cand.)
 Inferential statistics involves methods of using information from a sample to draw conclusions
about the population. Inferential statistics includes methods like point estimation, interval
estimation and hypothesis testing which are all based on probability theory.
Descriptive and inferential statistics are interrelated. It is almost always necessary to use methods
of descriptive statistics to organize and summarize the information obtained from a sample before
methods of inferential statistics can be used to make more thorough analysis of the subject under
investigation. Furthermore, the preliminary descriptive analysis of a sample often reveals features
that lead to the choice of the appropriate inferential method to be later used.

1.2 Steps of statistical investigation

The main steps utilized in a statistical investigation include four components:

1. Clarifying the problem and formulating questions or hypotheses that can be answered with the
data,
2. Designing or creating an appropriate experiment that can collect the data required,
3. Finding and using the appropriate techniques needed to accurately analyze the collected data,
and
4. Interpreting the collected data and results so as to answer the questions and hypotheses that
were proposed in the first place.
The main steps in a statistical investigation are thought to be a cylindrical process that helps ensure
that all procedures are completed logically. The aim of opening a statistical investigation is to
answer the many questions that are present in the world, and is a technique that has been commonly
applied by statisticians.

1.3. Importance and Limitation of Statistics

1.3.1 Importance of Statistics

There are many functions of statistics. Let us consider the following five important functions.

a). Condensation:
Generally speaking by the word ‘ to condense’ , we mean to reduce or to lessen. Condensation is
mainly applied at embracing the understanding of a huge mass of data by providing only few
observations. Thus, Statistical measures help to reduce the complexity of the data and consequently
to understand any huge mass of data.

b). Comparison:
Classification and tabulation are the two methods that are used to condense the data. They help us
to compare data collected from different sources. Grand totals, measures of central tendency
measures of dispersion, graphs and diagrams, coefficient of correlation etc provide ample scope
for comparison.
As statistics is an aggregate of facts and figures, comparison is always possible and in fact
comparison helps us to understand the data in a better way.

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Instructor: Yohannes D (PhD. Cand.)
c). Forecasting:
By the word forecasting, we mean to predict or to estimate beforehand. In business also forecasting
plays a dominant role in connection with production, sales, profits etc. The analysis of time series
and regression analysis plays an important role in forecasting.

d).Estimation:
One of the main objectives of statistics is drawn inference about a population from the analysis for
the sample drawn from that population.
In estimation theory, we estimate the unknown value of the population parameter based on the
sample observations.
Suppose we are given a sample of heights of hundred students in a school, based upon the heights
of these 100 students, it is possible to estimate the average height of all students in that school.

e). Tests of Hypothesis:

A statistical hypothesis is some statement about the probability distribution, characterising a
population on the basis of the information available from the sample observations. In the
formulation and testing of hypothesis, statistical methods are extremely useful.

1.3.2 Limitation of Statistics

Statistics with all its wide application in every sphere of human activity has its own limitations.
Some of them are given below.

1. Statistics is not suitable to the study of qualitative phenomenon:

Since statistics is basically a science and deals with a set of numerical data, it is applicable to the
study of only these subjects of enquiry, which can be expressed in terms of quantitative
measurements. As a matter of fact, qualitative phenomenon like honesty, poverty, beauty,
intelligence etc, cannot be expressed numerically and any statistical analysis cannot be directly
applied on these qualitative phenomenons.
Nevertheless, statistical techniques may be applied indirectly by first reducing the qualitative
expressions to accurate quantitative terms. For example, the intelligence of a group of students can
be studied on the basis of their marks in a particular examination.

2. Statistics does not study individuals:

Statistics does not give any specific importance to the individual items, in fact it deals with an
aggregate of objects. Individual items, when they are taken individually do not constitute any
statistical data and do not serve any purpose for any statistical enquiry.

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Instructor: Yohannes D (PhD. Cand.)
3. Statistical laws are not exact:
It is well known that mathematical and physical sciences are exact. But statistical laws are not
exact and statistical laws are only approximations. Statistical conclusions are not universally true.
They are true only on an average.

4. Statistics table may be misused:

Statistics must be used only by experts; otherwise, statistical methods are the most dangerous tools
on the hands of the inexpert. The use of statistical tools by the inexperienced and untraced persons
might lead to wrong conclusions. Statistics can be easily misused by quoting wrong figures of data.

5. Statistics is only, one of the methods of studying a problem:

Statistical method do not provide complete solution of the problems because problems are to be
studied taking the background of the countries culture, philosophy or religion into consideration.
Thus the statistical study should be supplemented by other evidences.

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Instructor: Yohannes D (PhD. Cand.)