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How To Create A Histogram in Excel

This document provides instructions for creating a histogram in Excel using data from a Monte Carlo simulation with 5000 observations. It describes using the FREQUENCY function to calculate counts within bins to generate the histogram. The histogram provides a visual representation of the distribution of the data and information about uncertainty, outliers, and whether the data fits a normal distribution. It also explains how to create a scaled histogram to compare to probability distributions by normalizing the area under the curve.

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83 views

How To Create A Histogram in Excel

This document provides instructions for creating a histogram in Excel using data from a Monte Carlo simulation with 5000 observations. It describes using the FREQUENCY function to calculate counts within bins to generate the histogram. The histogram provides a visual representation of the distribution of the data and information about uncertainty, outliers, and whether the data fits a normal distribution. It also explains how to create a scaled histogram to compare to probability distributions by normalizing the area under the curve.

Uploaded by

Adquisiciones Mayores CADE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Creating a Histogram in Excel

vertex42.com/ExcelArticles/mc/Histogram.html

By Jon Wittwer

Creating a histogram is an essential part of doing a statistical


analysis because it provides a visual representation of data.

In Part 3 of this Monte Carlo Simulation example, we iteratively


ran a stochastic sales forecast model to end up with 5000
possible values (observations) for our single response variable,
profit. If you have not already, download the Sales Forecast Example Spreadsheet.

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The last step is to analyze the results to figure out how much the profit might be expected to vary based
on our uncertainty in the values used as inputs for our model. We will start off by creating a histogram in
Excel. The image below shows the end result. Keep reading below to learn how to make the histogram.

Figure 1: A Histogram in Excel for the response variable Profit, created using a Bar Chart.
(From a Monte Carlo simulation using n = 5000 points and 40 bins).

We can glean a lot of information from this histogram:

It looks like profit will be positive, most of the time.


The uncertainty is quite large, varying between -1000 to 3400.
The distribution does not look like a perfect Normal distribution.
There doesn't appear to be outliers, truncation, multiple modes, etc.

The histogram tells a good story, but in many cases, we want to estimate the probability of being below
or above some value, or between a set of specification limits. To skip ahead to the next step in our
analysis, move on to Summary Statistics, or continue reading below to learn how to create the histogram
in Excel.

[ Generating Random Numbers ]    

[ Summary Statistics ]

Update 7/2/15: A Histogram chart is one of the new built-in chart types in Excel 2016, finally! (Read about
it).

Method 1: Using the Histogram Tool in the Analysis Tool-Pak.

This is probably the easiest method, but you have to re-run the tool each to you
do a new simulation. AND, you still need to create an array of bins (which
will be discussed below).

Method 2: Using the FREQUENCY function in Excel.

This is the method used in the spreadsheet for the sales forecast example. One of the
reasons I like this method is that you can make the histogram dynamic, meaning that
every time you re-run the MC simulation, the chart will automatically update. This is how
you do it:

Step 1: Create an array of bins


The figure below shows how to easily create a dynamic array of bins. This is a basic technique for
creating an array of N evenly spaced numbers.

To create the dynamic array, enter the following formulas:


  B6 = $B$2
  B7 = B6+($B$3-$B$2)/5

Then, copy cell B7 down to B11

After you create the array of bins, you can go ahead and use the
Histogram tool, or you can
proceed with the next step.

Step 2: Use Excel's FREQUENCY formula


The next figure is a screen shot from the example Monte Carlo
simulation. I'm not going
to explain the FREQUENCY function in detail since you can look it
up in the Excel's help
file. But, one thing to remember is that it is an array function, and
after you enter the formula,
you will need to press Ctrl+Shift+Enter. Note that the simulation Figure 2: A dynamic array of 5 bins.

results (Profit) are in column G


and there are 5000 data points ( Points: J5=COUNT(G:G) ).
The Formula for the Count column:

  FREQUENCY(data_array,bins_array)

  a) Select cells J8:J48

  b) Enter the array formula: =FREQUENCY(G:G,I8:I48)

  c) Press Ctrl+Shift+Enter

Figure 3: Layout in Excel for Creating a Dynamic Scaled Histogram.

Creating a Scaled Histogram

If you want to compare your histogram with a probability distribution, you will need to scale the
histogram
so that the area under the curve is equal to 1 (one of the properties of probability distributions).
Histograms normally include the count of the data points that fall into each bin on the y-axis, but
after scaling, the y-axis will be the frequency (a not-so-easy-to-interpret number that in all practicality
you can just not worry about). The frequency doesn't represent probability!

To scale the histogram, use the following method:


Scaled = (Count/Points) / (BinSize)

  
  a) K8 = (J8/$J$5)/($I$9-$I$8)
  b) Copy cell K8 down to K48

  c) Press F9 to force a recalculation (may take a while)

Step 3: Create the Histogram Chart

Bar Chart, Line Chart, or Area Chart:

To create the histogram, just create a bar chart using the Bins column for the Labels and the Count or
Scaled column as the Values. Tip: To reduce the spacing between the bars, right-click on the bars and
select "Format Data Series...". Then go to the Options tab and reduce the Gap. Figure 1 above was
created this way.

A More Flexible Histogram Chart

One of the problems with using bar charts and area charts is that the numbers on the x-axis are just
labels. This can make it very difficult to overlay data that uses a different number of points or to show the
proper scale when bins are not all the same size. However, you CAN use a scatter plot to create a
histogram. After creating a line using the Bins column for the X Values and Count or Scaled column for
the Y Values, add Y Error Bars to the line that extend down to the x-axis (by setting the Percentage to
100%). You can right-click on these error bars to change the line widths, color, etc.

Figure 4: Example Histogram Created Using a Scatter Plot and Error Bars.

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[ Generating Random Numbers ]    

[ Summary Statistics ]
REFERENCES:
NIST/SEMATECH e-Handbook of Statistical Methods, June 2004, "Histogram",
http://www.itl.nist.gov/div898/handbook/eda/section3/histogra.htm

CITE THIS PAGE AS:


Wittwer, J.W., "Creating a Histogram In Excel" From Vertex42.com, June 1, 2004

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