INTRODUCTION TO

STATISTICS AND
DESCRIPTIVE STATISTICS

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 LECTURE GOALS
After completing this lecture, you should be able to:

 Know key definitions: Population vs. Sample

 Identify the different types of statistical charts
 Compute and interpret the mean, median, and mode for a
set of data
 Compute the range, variance, and standard deviation and
know what these values mean

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 POPULATIONS and SAMPLES

A Population - the entire items or individuals of interest

eg: All voters in the election, all students in a university, all
workers in a factory etc.

Parameter - a summary measure computed to describe a

characteristic of the population eg average age of population

A Sample - a subset of the population

eg: 1000 voters selected at random for interview, 500 students
from a university, etc.

Statistic - summary measure computed to describe a

characteristic of the sample
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 DESCRIBING DATA USING NUMERICAL
MEASURES
Describing Data Numerically

Central Location Variation / dispersion

Mean Range

Median Interquartile Range

Mode
Variance

Standard Deviation

Coefficient of
Variation 4
 MEAN (ARITHMETIC AVERAGE)
 The Mean is the arithmetic average of
data values
N = Population Size
Population mean
N

xx1  x2    x N
i
 
i 1
N N
n = Sample Size
n
Sample mean x i
x1  x2    xn
x i 1

n n
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 MEAN (ARITHMETIC AVERAGE)
 The most common measure of central tendency
 Mean = sum of values divided by the number of
values
 Affected by extreme values (outliers)

For example, 2 sets of data are given below:

2, 7, 9 12, 15 : mean = (2+7+9+12+15)/5 = 9

2, 7, 9 12, 15, 70 : mean = (2+7+9+12+15+70)/6

= 19.17
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 MEDIAN
 In an ordered array, the median is the
“middle” number, i.e., the number that splits
the distribution in half
 The median is not affected by extreme
values (outliers)

 To find the median, sort the data values from low

to high
 Find the value in the i = (n+1)/2 position
(middle position)

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 For example, a set of data is given below:
10 5 19 8 3
First, we rank the given data in an increasing
order as follows:
3 5 8 10 19
There are five observations in the data set.
Consequently, n = 5 and

Position of the middle term = (5+1)/2 = 3

Median is 8
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 MODE
 The value that occurs most often
 Not affected by extreme values
 There may be no mode
 There may be several modes

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For example, 2 sets of data are given as
follows:
77 69 74 81 71 68 74 73
Mode = 74

495, 486, 503, 495, 470, 505, 470, 499

Mode = 495 and 470

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 SHAPE OF A DISTRIBUTION
 Describes how data is distributed
 Symmetric or skewed

Left-Skewed Symmetric Right-Skewed

outliers outliers

Mean < Median Mean = Median Mean > Median

(Longer tail extends to left) (Longer tail extends to right)

Example sets of data:

1, 30, 34, 40, 46, 50 1, 2, 4, 6, 7 2, 7, 9, 12, 15, 70
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 Which measure of location
is the “best”?

 Mean is generally used for

symmetric distributions and no
extreme values (outliers) exist
 Median is often used for
skewed distributions and if
extreme values (outliers) exist.

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 Measures of Variation

Variation

Range Variance Standard Deviation Coefficient of

Variation
Population Population
Interquartile
Variance Standard
Range
Deviation

Sample Sample
Variance Standard
Deviation

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 Variation

 Measures of variation give information on the

spread or variability of the data values.
Example sets of data:
20, 25, 30, 35, 40
Mean: 30
Standard deviation (SD): 7.9

10, 20, 30, 40, 50

Mean: 30
Standard deviation (SD): 15.8

Same center / mean,

different variation 14
 RANGE
 Simplest measure of variation
 Difference between the largest and the smallest
observations:

Range = xmaximum – xminimum

Example:

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

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 Disadvantages of the Range
 Ignores the way in which data are distributed

7 8 9 10 11 12 7 8 9 10 11 12

 Sensitive to outliers

1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,5

1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,120

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 Interquartile Range
 Difference between the 3rd quarter and
1st quarter of the data
 Interquartile range = 3rd quartile – 1st quartile

 To find the 1st quartile and the 3rd quartile, sort

the data values from low to high.
1st quartile: the value in the (n+1) position
3rd quartile: the value in the (n+1) position

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 Find the Inter Quartile Range
Sample Data in Ordered Array: 11 12 13 16 16 17 18 21 22
*make sure the data is ranked in an increasing order

1st quartile position = (9+1) = 2.5,

1st quartile = (12+13)/2 = 12.5,

3rd quartile position = (9+1) = 7.5,

3rd quartile = (18+21)/2 = 19.5

Interquartile range = 19.5 – 12.5 = 7

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 VARIANCE

Population variance:
N

 i
(x  μ) 2

σ2  i 1
N

n
Sample variance:  (x i  x) 2

s2  i1
n -1
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 STANDARD DEVIATION

Population standard deviation:

x x
N 2 2

2
σ  σ
 i
(x  μ) 2
OR   
 N 
i 1 N  
N
 Sample standard deviation:

s 
2
n

 (x i  x ) 2
OR
1   x 2


s i 1
s
n 1   x 
2

n 
n -1  
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 Calculation Example:
Sample Standard Deviation
Sample Data (Xi) : 48.50 38.40 65.50
22.60 79.80 54.60
x x²
48.50 2352.25
38.40 1474.56
65.50 4290.25
22.60 510.76
79.80 6368.04
54.60 2981.16
∑x = 309.40 ∑x² = 17,977.02
    
2
1  x 1  (309.40) 2

s
n 1 
 x 
2

n 
  17,977.02 
6 1  6
  20.11
  
 Coefficient of Variation

 The coefficient of variation is used to

measure variation relative to the mean

Population Sample

σ  s 
CV  
μ
  100% CV   
   x   100%
 

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Comparing Coefficients of Variation
 Stock A:
 Average price last year = $50 CV = ($5/$50) . 100%
 Standard deviation = $5
= 10%

 Stock B:
 Average price last year = $100
CV = ($5/$100) . 100%
 Standard deviation = $5
= 5%

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Both stocks have the same standard
deviation, but stock B is less variable
relative to its price, i.e. the price for stock
B is less volatile than stock A.

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