Book References
1. Probability & Statistics for Engineers
& Scientists
by
Ronald E. Walpole, Raymond H. Myers,
Sharon L. Myers, Keying Ye
2. Fundamentals of Mathematical
Statistics
by
S. C. Gupta and V. K. Kapoor
Statistics is a branch of applied mathematics that involves the collection,
description, analysis, and inference of conclusions from quantitative data.
However, there are two important and basic ideas involved in statistics; they
are uncertainty and variation. The uncertainty and variation in different fields
can be determined only through statistical analysis. These uncertainties are
basically determined by the probability that plays an important role in
statistics.
Basics of Statistics
The basics of statistics include the measure of central tendency and the
measure of dispersion. The central tendencies are mean, median and
mode and dispersions comprise variance and standard deviation. Mean is
the average of the observations. Median is the central value when
observations are arranged in order. The mode determines the most frequent
observations in a data set.
Variation is the measure of spread out of the collection of data. Standard
Types of Statistics
Basically, there are two types of statistics.
•Descriptive Statistics Standard
deviation is the measure of the dispersion of data from
the mean. The square
•Inferential Statistics
In the case of descriptive statistics, the data or collection of data is described
in summary. But in the case of inferential stats, it is used to explain the
descriptive one. Both these types have been used on large scale.
Descriptive Statistics
The data is summarized and explained in descriptive statistics. The
summarization is done from a population sample utilizing several factors
such as mean and standard deviation. Descriptive statistics is a way of
organizing, representing, and explaining a set of data using charts, graphs,
and summary measures. Histograms, pie charts, bars, and scatter plots are
common ways to summarize data and present it in tables or graphs.
Descriptive statistics are just that: descriptive. They don’t need to be
We attempt to interpret the meaning of descriptive statistics using inferential
statistics. We utilize inferential statistics to convey the meaning of the
collected data after it has been collected, evaluated, and summarized. The
probability principle is used in inferential statistics to determine if patterns
found in a study sample may be extrapolated to the wider population from
which the sample was drawn. Inferential statistics are used to test
hypotheses and study correlations between variables, and they can also be
used to predict population sizes. Inferential statistics are used to derive
conclusions and inferences from samples, i.e. to create accurate
generalizations.
Regression analysis is a widely used technique of statistical inference. It is used to
determine the strength and nature of the relationship (the correlation) between a
dependent variable and one or more explanatory (independent) variables. The output
of a regression model is often analyzed for statistical significance, meaning that a
result from findings generated by testing or experimentation is not likely to have
Descriptive statistics are used to describe or summarize the characteristics of
a sample or data set, such as a variable’s mean, standard deviation, or
frequency. Inferential statistics employ any number of techniques to relate
variables in a data set to one another. An example would be using correlation
or regression analysis. These can then be used to estimate forecasts or infer
causality.
Descriptive Statistics: The descriptive method of statistics is used to
describe the data collected and summarize the data and its properties using
the measures of central tendencies and the measures of dispersion.
Inferential Statistics
This method of statistics is used to draw conclusions from the data. Inferential
statistics requires statistical tests performed on samples, and it draws
conclusions by identifying the differences between the two groups. Tests
calculate the p-value that is compared with the probability of chance (α) =
0.05. If the p-value is less than α, then it is concluded that the p-value is
What is Data in Statistics?
Data is a collection of facts, such as numbers, words, measurements,
observations etc.
Types of Data
•Qualitative data- it is descriptive data.
[Link]- She can run fast, He is thin.
•Quantitative data- it is numerical information.
[Link]- an Octopus is an eight legged creature.
Types of quantitative data
•Discrete data- has a particular fixed value. It can be counted
•Continuous data- is not fixed but has a range of data. It can be measured.
Representation of Data
There are different ways to represent data such as through graphs, charts or
tables. The general representation of statistical data are:
•Bar Graph
•Pie Chart
•Line Graph
•Pictograph
•Histogram
•Frequency Distribution
A small value of dispersion means that the average is a good
representative of the data, while a larger value means that the
Can standard deviation be zero?
A standard deviation of 0 means that all the
values in the dataset are the same, and
thus have no deviation from the average.
What is the difference between variance and standard deviation?
Variance is the average squared deviations from the mean, while standard
deviation is the square root of this number. Both measures reflect
variability in a distribution, but their units differ:
Standard deviation is expressed in the same units as the original values
(e.g., minutes or meters).
Variance is expressed in much larger units (e.g., meters squared).
What types of data can be described by a frequency distribution?
Categorical variables can be described by a frequency distribution.
Quantitative variables can also be described by a frequency
distribution, but first they need to be grouped into interval classes.
Coefficient of Variation
Coefficient of variation is a type of
relative measure of dispersion. It is
expressed as the ratio of the
standard deviation to the mean.
The coefficient of variation is a
dimensionless quantity and is
usually given as a percentage. It
helps to compare two data sets on
the basis of the degree of
variation.
The coefficient of variation can be
determined for both a sample as
well as a population. In industries
Coefficient of Variation Uses
If two data sets having similar values need to be compared then the
standard deviation can be used. However, if two data sets having different
unit need to be compared then the coefficient of variation needs to be used.
Some applications of coefficient of variation are as follows:
The coefficient of variation is also used to gauge the consistency of data. A
distribution with a smaller coefficient of variation is more consistent than one
What is a Good Coefficient of Is Coefficient of Variation a Measure
of Dispersion?
Variation? Coefficient of variation is a relative
A coefficient of variation less than 20% measure of dispersion. It is equal to
the ratio of the standard deviation to
is acceptable. For lab results, a good the mean and can be expressed as a
coefficient of variation should be lesser percentage.
Fred wants to find a new investment for his portfolio. He is looking for a safe
investment that provides stable returns. He considers the following options
for investment:
Stocks: Fred was offered stock of ABC Corp. It is a mature company with
strong operational and financial performance. The volatility of the stock is
10%, and the expected return is 14%.
ETFs: Another option is an Exchange-Traded Fund (ETF) which tracks the
performance of the S&P 500 index. The ETF offers an expected return of
An Exchange-Traded Fund (ETF) is an investment fund that holds assets such as stocks,
13% with a volatility
commodities, of 7%.currency.
bonds, or foreign
Bonds: Bonds with excellent credit ratings offer an expected return of 3%
with 2% volatility.