Descriptive Statistical Measures

Measures of Location

• It provides estimates of a single value that in some

fashion represents the centering of a set of data.
• The most common is average
– Measure students accomplishment in college:
grade point average
– Measure the performance of sports team:
batting average
– Measure performance in business: average
delivery time
• Arithmetic Mean, Median, Mode and Midrange
 Arithmetic Mean
• The average is formally called the arithmetic
mean or simply the mean.
• It is the sum of observations divided by the
number of observations.
• The mean is calculated in Excel using the function
AVERAGE(data range)
– To find the mean cost per order in Purchase
Orders Excel file
• Mean is meaningful for both interval and ratio
data. It can be affected by outliers.
 Median
• It specifies the middle value when the data are arranged
from least to greatest.
• For an
– Odd number of observations, the median is the middle
of the sorted numbers.
– Even number of observations, the median is the mean
of two middle numbers.
• Two ways:
– Using Sort option in Excel rank-order the data and
then determine the median.
– Excel function MEDIAN(data range)
• To find the median cost per order in Purchase Orders
Excel file
• It is meaningful for ratio, interval and ordinal data.
 Mode
• It is the observation that occurs most frequently.
• Most useful for data sets that contain a relatively small number
of unique values.
• Two ways
– From frequency distribution and histogram, mode is the
group with the greatest frequency
– Using Excel function MODE.SNGL(data range). For data
sets having multiple modes MODE.MUL(data range) is
used.
• Find the mode for A/P terms in Purchase Order Excel file.
 Midrange
• It is the average of the greatest and least value in the data
set.
• Two ways:
– Sort the data and take average of first and last
element
– Use MIN and MAX Excel function to find minimum and
maximum values respectively. Then take average of them.
average(min,max)
• Usually a rougher estimate than the mean
 Quoting Computer Repair Time

Dataset includes 250 repair times

for customers.
What repair time would be
reasonable to quote to a new
customer?
Mean, median and mode are all
very close and show that the typical
repair time is about 2 weeks.
What if repair time of 2 weeks
is quoted?
 Quoting Computer Repair Time

Longest repair time took almost 6 weeks. Can the company give guaranteed repair time
of 6 weeks?
90% of time repairs are completed within 3 weeks. Rare occasion it take longer.

Decision: The customers could expect their computers back within 2 to 3 weeks
and inform them that it might take longer if a special part was needed.
 Measures of Dispersion

• Dispersion refers to the degree of variation in the data, that

is, the numerical spread (or compactness) of the data.
• Several statistical measures characterize dispersion:
– Range
– Variance
– Interquartile Range
– Standard deviation
 Interquartile Range
• Range: difference between the maximum value and the
minimum value in the dataset.
– =MAX(data range) – MIN(data range)
– Range for cost per order data in Purchase Orders
database.
• Interquartile Range (IQR): difference between the first and
third quartiles, Q3-Q1
– Middle 50% of data
– for cost per order data in Purchase Orders database.
 Variance
• Its computation depends on all the data. The larger the
variance, the more the data are spread out from the mean and
the more variability one can expect in the observations.
– Excel function VAR.S(data range) for sample variance
– Excel function VAR.P(data range) for population variance
• The dimension of the variance is the square of the dimension
of the observations. Hence difficult to use in practical
applications.
 Standard Deviation

• It is the square root of the variance. Its unit of measure are the same as
the units of data.
– Excel function STDEV.P(data range) calculates the standard
deviation for a population
– Excel function STDEV.S(data range) calculates the standard
deviation for a sample
• It is a popular measure of risk particularly in financial analysis.
• A larger standard deviation implies that while a greater potential of higher
return exists, there is also greater risk of realizing a lower return.
– Find mean and standard deviation for Intel and GE stocks in
Closing Stock Prices Excel file.
 Coefficient of Variation

• It provides a relative measure of the dispersion in data relative

to the mean and is defined as
CV = standard deviation
mean
• Multiplied by 100 to express it as percent.
• For comparing the variability of two or more datasets.
• It provides a relative measure of risk to return. The smaller
the coefficient of variation, the smaller the relative risk is
for the return provided.
• Apply to Closing Stock Prices worksheet.
 Grouped Data
• The sample data are summarized in a frequency
distribution.
• Extracting information from government databases
such as the Census Bureau of Labor Statistics
• The mean and variance are calculated differently.
Calculations of Mean and Variance Using a Frequency
Distribution in Computer Repair Time Excel file.
 Measures of Association
• Two variables have a strong statistical relationship
with one another if they appear to move together.
– Ice cream sales likely have a strong relationship
with daily temperature.
• Scatter plot is used to visualize relationships
between two variables.
• Covariance and Correlations
 Covariance
• It is a measure of the linear association between two
variables, X and Y.
• It is the average of the product of the deviations of each pair
of observations from their respective means.
• The sign of the covariance tells whether there is a direct
relationship or an inverse relationship.
• The Excel function COVARIANCE.P(array1,array2) and
COVARIANCE.S(array1,array2) computes the covariance of a
population and sample respectively.
– Using Colleges and Universities Excel file
 Correlation
• It is a measure of the linear relationship between two
variables, X and Y, which does not depend on the unit of
measurements.
• It is measured by correlation coefficient.
• Excel CORREL(array1, array2) function computes the
sample correlation coefficient of two data arrays.
• Correlation of
– 0 indicates that the two variables have no linear
relationship to each other.
– +ve
– -ve
 Excel Correlation Tool
• It computes correlation coefficients for more than
two arrays.
• Select Correlation from the Data Analysis tool list.
• Using Correlation Tool for Colleges and
Universities Data