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Business statistics ( Methods of variablity measurement))
Methods of Variability Measurement
Commonly used methods: Range, Variance,
Standard deviation, Interquartile Range, Coefficient
of Variation etc.
Range: The difference between the largest and the smallest
observations. The range of 10, 5, 2, 100 is (100-2)=98.
It’s a crude measure of variability.
Variability (or Dispersion) measures the
amount of scatter in a dataset.
2
Methods of Variability Measurement
Variance: The variance of a set of observations is the average of the
squares of the deviations of the observations from their mean.
In symbols, the variance of the n observations x1, x2,…xn is
Variance of 5, 7, 3? Mean is (5+7+3)/3 = 5 and the variance is 4
4
13
)57()53()55( 222



1
)(....)( 22
12



n
xxxx
S n
Standard Deviation: Square root of the variance. The standard
deviation of the above example is 2.
>
3
Methods of Variability Measurement
Quartiles: Data can be divided into four regions that cover the
total range of observed values. Cut points for these regions are
known as quartiles.
The first quartile (Q1) is the first 25% of the data.
The second quartile (Q2) is between the 25th and 50th percentage
points in the data. The upper bound of Q2 is the median.
The third quartile (Q3) is the 25% of the data lying between the median
and the 75% cut point in the data.
Q1 is the median of the first half of the ordered observations and Q3 is
the median of the second half of the ordered observations.
In notations, quartiles of a data is the ((n+1)/4)qth observation of the
data, where q is the desired quartile and n is the number of
observations of data.
4
Methods of Variability Measurement
An example with 15 numbers
3 6 7 11 13 22 30 40 44 50 52 61 68 80 94
Q1 Q2 Q3
The first quartile is Q1=11.
The second quartile is Q2=40= (2(15+1)/4)=8th Observation (This is
also called the Median.)
The third quartile is Q3=61= (3(15+1)/4)=12th Observation is 61
Inter-quartile Range: Difference between Q3 and Q1. Inter-
quartile range of the previous example is 61- 40=21.
The middle half of the ordered data lie between 40 and 61.
In the following example Q1= ((15+1)/4)1 =4th observation of
the data. The 4th observation is 11. So Q1 of this data set is 11.
5
Deciles and Percentiles
Percentiles: If data is ordered and divided into 100 parts, then cut
points are called Percentiles. 25th percentile is the Q1, 50th
percentile is the Median (Q2) and the 75th percentile of the data is
Q3.
Deciles: If data is ordered and divided into 10 parts, then cut points
are called Deciles
In notations, percentiles of a data is the ((n+1)/100)p th observation
of the data, where p is the desired percentile and n is the number of
observations of data.
Coefficient of Variation: The standard deviation of data divided by it’s
mean. It is usually expressed in percent.
100
x

Coefficient of Variation =
6
Five Number Summary
Five Number Summary: The five number summary of a distribution
consists of the smallest (Minimum) observation, the first quartile (Q1),
The median(Q2), the third quartile, and the largest (Maximum)
observation written in order from smallest to largest.
Box Plot: A box plot is a graph of the five number summary. The
central box spans the quartiles. A line within the box marks the
median. Lines extending above and below the box mark the
smallest and the largest observations (i.e., the range).
Outlying samples may be additionally plotted outside the range.
7
Boxplot
0
20
40
60
80
100
120
140
160
1
q1
min
median
max
q3
Distribution of Age in Month
8
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Business statistics ( Methods of variablity measurement))

  • 2. Methods of Variability Measurement Commonly used methods: Range, Variance, Standard deviation, Interquartile Range, Coefficient of Variation etc. Range: The difference between the largest and the smallest observations. The range of 10, 5, 2, 100 is (100-2)=98. It’s a crude measure of variability. Variability (or Dispersion) measures the amount of scatter in a dataset. 2
  • 3. Methods of Variability Measurement Variance: The variance of a set of observations is the average of the squares of the deviations of the observations from their mean. In symbols, the variance of the n observations x1, x2,…xn is Variance of 5, 7, 3? Mean is (5+7+3)/3 = 5 and the variance is 4 4 13 )57()53()55( 222    1 )(....)( 22 12    n xxxx S n Standard Deviation: Square root of the variance. The standard deviation of the above example is 2. > 3
  • 4. Methods of Variability Measurement Quartiles: Data can be divided into four regions that cover the total range of observed values. Cut points for these regions are known as quartiles. The first quartile (Q1) is the first 25% of the data. The second quartile (Q2) is between the 25th and 50th percentage points in the data. The upper bound of Q2 is the median. The third quartile (Q3) is the 25% of the data lying between the median and the 75% cut point in the data. Q1 is the median of the first half of the ordered observations and Q3 is the median of the second half of the ordered observations. In notations, quartiles of a data is the ((n+1)/4)qth observation of the data, where q is the desired quartile and n is the number of observations of data. 4
  • 5. Methods of Variability Measurement An example with 15 numbers 3 6 7 11 13 22 30 40 44 50 52 61 68 80 94 Q1 Q2 Q3 The first quartile is Q1=11. The second quartile is Q2=40= (2(15+1)/4)=8th Observation (This is also called the Median.) The third quartile is Q3=61= (3(15+1)/4)=12th Observation is 61 Inter-quartile Range: Difference between Q3 and Q1. Inter- quartile range of the previous example is 61- 40=21. The middle half of the ordered data lie between 40 and 61. In the following example Q1= ((15+1)/4)1 =4th observation of the data. The 4th observation is 11. So Q1 of this data set is 11. 5
  • 6. Deciles and Percentiles Percentiles: If data is ordered and divided into 100 parts, then cut points are called Percentiles. 25th percentile is the Q1, 50th percentile is the Median (Q2) and the 75th percentile of the data is Q3. Deciles: If data is ordered and divided into 10 parts, then cut points are called Deciles In notations, percentiles of a data is the ((n+1)/100)p th observation of the data, where p is the desired percentile and n is the number of observations of data. Coefficient of Variation: The standard deviation of data divided by it’s mean. It is usually expressed in percent. 100 x  Coefficient of Variation = 6
  • 7. Five Number Summary Five Number Summary: The five number summary of a distribution consists of the smallest (Minimum) observation, the first quartile (Q1), The median(Q2), the third quartile, and the largest (Maximum) observation written in order from smallest to largest. Box Plot: A box plot is a graph of the five number summary. The central box spans the quartiles. A line within the box marks the median. Lines extending above and below the box mark the smallest and the largest observations (i.e., the range). Outlying samples may be additionally plotted outside the range. 7