Lecture 3

Descriptive Statistics:
Numerical Methods
 Lecture Outline

Measures of Location
Measures of Variability
Measures of Relative Location and Detecting
Outliers
Exploratory Data Analysis
Measures of Association Between Two Variables
The Weighted Mean and Working with Grouped
Data

x
S
Slide 2
 Measures of Location

Mean

Median

Mode

Percentiles

Quartiles

Slide 3
 Example: Apartment Rents
Given below is a sample of monthly rent
values ($) for one-bedroom apartments. The
data is a sample of 70 apartments in a
particular city. The data are presented in
ascending order.

425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 4
 Mean
The mean of a data set is the average of all the
data values.
If the data are from a sample, the mean is
denoted by x .
 xi
x=
n
If the data are from a population, the mean is
denoted by m (mu).

 xi
=
N

Slide 5
 Example: Apartment Rents
Mean
 xi 34 , 356
x= = = 490.80
n 70

425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 6
 Median
The median is the measure of location most

often reported for annual income and property

value data.

A few extremely large incomes or property

values can inflate the mean.

Slide 7
 Median
The median of a data set is the value in the
middle when the data items are arranged in
ascending order.

For an odd number of observations, the median

is the middle value.

For an even number of observations, the

median is the average of the two middle values.

Slide 8
 Example: Apartment Rents
Median
Median = 50th percentile
i = (p/100)n = (50/100)70 = 35.5
Averaging the 35th and 36th data values:
Median = (475 + 475)/2 = 475
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 9
 Mode
The mode of a data set is the value that occurs
with greatest frequency.
The greatest frequency can occur at two or
more different values.
If the data have exactly two modes, the data are
bimodal.
If the data have more than two modes, the data
are multimodal.

Slide 10
 Example: Apartment Rents
Mode
450 occurred most frequently (7 times)
Mode = 450
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 11
 Percentiles

A percentile provides information about how

the data are spread over the interval from the

smallest value to the largest value.

Admission test scores for colleges and

universities are frequently reported in terms of

percentiles.

Slide 12
 Percentiles
The pth percentile of a data set is a value
such that at least p percent of the items take
on this value or less and at least (100 - p)
percent of the items take on this value or
more.
Arrange the data in ascending order.
Compute index i, the position of the pth
percentile.
i = (p/100)n
If i is not an integer, round up. The p th
percentile is the value in the i th position.
If i is an integer, the p th percentile is the
average of the values in positions i and i
+1.
Slide 13
 Example: Apartment Rents
90th Percentile
i = (p/100)n = (90/100)70 = 63
Averaging the 63rd and 64th data values: 90th
Percentile = (580 + 590)/2 = 585

425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 14
 Quartiles

Quartiles are specific percentiles

First Quartile = 25th Percentile

Second Quartile = 50th Percentile = Median

Third Quartile = 75th Percentile

Slide 15
 Example: Apartment Rents
Third Quartile
Third quartile = 75th percentile
i = (p/100)n = (75/100)70 = 52.5 = 53
Third quartile = 525
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 16
 Measures of Variability
It is often desirable to consider measures of
variability (dispersion), as well as measures of
location.

For example, in choosing supplier A or supplier

B we might consider not only the average
delivery time for each, but also the variability in
delivery time for each.

Slide 17
 Measures of Variability
Range

Interquartile Range

Variance

Standard Deviation

Coefficient of Variation

Slide 18
 Range
The range of a data set is the difference

between the largest and smallest data values.

It is the simplest measure of variability.

It is very sensitive to the smallest and largest

data values.

Slide 19
 Example: Apartment Rents
Range
Range = largest value – smallest value
Range = 615 - 425 = 190
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 20
 Interquartile Range
The interquartile range of a data set is the

difference between the third quartile and the

first quartile.

It is the range for the middle 50% of the data.

It overcomes the sensitivity to extreme data

values.

Slide 21
 Example: Apartment Rents
Interquartile Range
3rd Quartile (Q3) = 525
1st Quartile (Q1) = 445
Interquartile Range = Q3 - Q1 = 525 - 445 = 80

425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 22
 Variance
The variance is a measure of variability that

utilizes all the data.

It is based on the difference between the value

of each observation (xi) and the mean (x for a

sample,  for a population).

Slide 23
 Variance
The variance is the average of the squared
differences between each data value and the
mean.
If the data set is a sample, the variance is
denoted by s2.
 ( xi − x ) 2
s2 =
n −1
If the data set is a population, the variance is
denoted by  2.

 ( x −  ) 2
2 = i
N

Slide 24
 Standard Deviation
The standard deviation of a data set is the
positive square root of the variance.
It is measured in the same units as the data,
making it more easily comparable, than the
variance, to the mean.
If the data set is a sample, the standard
deviation is denoted s.
s= s 2

If the data set is a population, the standard

deviation is denoted  (sigma).
 = 2

Slide 25
 Coefficient of Variation
The coefficient of variation indicates how large
the standard deviation is in relation to the
mean.
If the data set is a sample, the coefficient of
variation is computed as follows:
s
(100)
x
If the data set is a population, the coefficient of
variation is computed as follows:

(100)


Slide 26
 Example: Apartment Rents
Variance

s 2
=
 ( xi − x ) 2
= 2 , 996.16
n −1
Standard Deviation

s = s2 = 2996. 47 = 54. 74
Coefficient of Variation
s 54. 74
 100 =  100 = 11.15
x 490.80

Slide 27
Measures of Relative Location
and Detecting Outliers
z-Scores

Chebyshev’s Theorem

Empirical Rule

Detecting Outliers

Slide 28
 z-Scores
The z-score is often called the standardized
value.
It denotes the number of standard deviations a
data value xi is from the mean.
xi − x
zi =
s
A data value less than the sample mean will
have a z-score less than zero.
A data value greater than the sample mean will
have a z-score greater than zero.
A data value equal to the sample mean will
have a z-score of zero.

Slide 29
 Example: Apartment Rents
z-Score of Smallest Value (425)
xi − x 425 − 490.80
z= = = −1. 20
s 54. 74
Standardized Values for Apartment Rents

-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

Slide 30
 Chebyshev’s Theorem
At least (1 - 1/k2) of the items in any data set will
be within k standard deviations of the mean,
where k is any value greater Than 1.
At least 75% of the items must be within
k = 2 standard deviations of the mean.
At least 89% of the items must be within
k = 3 standard deviations of the mean.
At least 94% of the items must be within
k = 4 standard deviations of the mean.

Slide 31
 Example: Apartment Rents
Chebyshev’s Theorem

Let k = 1.5 with x = 490.80 and s = 54.74

At least (1 - 1/(1.5)2) = 1 - 0.44 = 0.56 or 56% of
the rent values must be between
x - k(s) = 490.80 - 1.5(54.74) = 409
and
x + k(s) = 490.80 + 1.5(54.74) = 573

Slide 32
 Example: Apartment Rents
Chebyshev’s Theorem (continued)
Actually, 86% of the rent values are between 409
and 573.
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 33
 Empirical Rule
For data having a bell-shaped distribution:

Approximately 68% of the data values will

be within one standard deviation of the
mean.

Slide 34
 Empirical Rule
For data having a bell-shaped distribution:

Approximately 95% of the data values will be

within two standard deviations of the mean.

Slide 35
 Empirical Rule
For data having a bell-shaped distribution:

Almost all (99.7%) of the items will be

within three standard deviations of the mean.

Slide 36
 Example: Apartment Rents
Empirical Rule
Interval % in Interval
Within +/- 1s 436.06 to 545.54 48/70 = 69%
Within +/- 2s 381.32 to 600.28 68/70 = 97%
Within +/- 3s 326.58 to 655.02 70/70 = 100%

425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 37
 Detecting Outliers
An outlier is an unusually small or unusually
large value in a data set.
A data value with a z-score less than -3 or
greater than +3 might be considered an outlier.
It might be an incorrectly recorded data value.
It might be a data value that was incorrectly
included in the data set.
It might be a correctly recorded data value that
belongs in the data set !

Slide 38
 Example: Apartment Rents
Detecting Outliers
The most extreme z-scores are -1.20 and 2.27.
Using |z| > 3 as the criterion for an outlier,
there are no outliers in this data set.
Standardized Values for Apartment Rents
-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

Slide 39
 Exploratory Data Analysis

Five-Number Summary

Box Plot

Slide 40
 Five-Number Summary
Smallest Value

First Quartile

Median

Third Quartile

Largest Value

Slide 41
 Example: Apartment Rents
Five-Number Summary
Lowest Value = 425 First Quartile = 450
Median = 475
Third Quartile = 525 Largest Value = 615
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

Slide 42
 Box Plot
A box is drawn with its ends located at the
first and third quartiles.
A vertical line is drawn in the box at the
location of the median.
Limits are located (not drawn) using the
interquartile range (IQR).
The lower limit is located 1.5(IQR) below Q1.
The upper limit is located 1.5(IQR) above Q3.
Data outside these limits are considered
outliers.

Slide 43
 Box Plot (Continued)
Whiskers (dashed lines) are drawn from the
ends of the box to the smallest and largest data
values inside the limits

The locations of each outlier is shown with the

symbol *

Slide 44
 Example: Apartment Rents
Box Plot

Lower Limit: Q1- 1.5(IQR) =450-1.5(75) = 337.5

Upper Limit: Q3+1.5(IQR) =525+1.5(75) = 637.5
There are no outliers.

375 400 425 450 475 500 525 550 575 600 625

Slide 45
 Measures of Association
Between Two Variables

Covariance

Correlation Coefficient

Slide 46
 Covariance
The covariance is a measure of the linear

association between two variables.

Positive values indicate a positive relationship.

Negative values indicate a negative

relationship.

Slide 47
 Covariance
If the data sets are samples, the covariance is
denoted by sxy.

 ( xi − x )( yi − y )
sxy =
n −1
If the data sets are populations, the covariance
is denoted by  xy .

 ( xi −  x )( yi −  y )
 xy =
N

Slide 48
 Correlation Coefficient
The coefficient can take on values between -1
and +1.
Values near -1 indicate a strong negative linear
relationship.
Values near +1 indicate a strong positive linear
relationship.
If the data sets are samples, the coefficient is rxy.
sxy
rxy =
sx s y
If the data sets are populations, the coefficient
is  xy .  xy
 xy =
 x y
Slide 49
 The Weighted Mean and
Working with Grouped Data
Weighted Mean

Mean for Grouped Data

Variance for Grouped Data

Standard Deviation for Grouped Data

Slide 50
 Weighted Mean
When the mean is computed by giving each
data value a weight that reflects its importance,
it is referred to as a weighted mean.
In the computation of a grade point average
(GPA), the weights are the number of credit
hours earned for each grade.
When data values vary in importance, the
analyst must choose the weight that best
reflects the importance of each value.

Slide 51
 Weighted Mean

x=
Wi xi
Wi

where:
xi = value of observation i
wi = weight for observation i

Slide 52
 Grouped Data
The weighted mean computation can be used to
obtain approximations of the mean, variance,
and standard deviation for the grouped data.
To compute the weighted mean, we treat the
midpoint of each class as though it were the
mean of all items in the class.
We compute a weighted mean of the class
midpoints using the class frequencies as
weights.
Similarly, in computing the variance and
standard deviation, the class frequencies are
used as weights.

Slide 53
 Mean for Grouped Data
Sample Data
x=
 fM
i i

f i

Population Data

=  fM
i i

N
where:
fi = frequency of class i
Mi = midpoint of class i

Slide 54
 Example: Apartment Rents
Given below is the previous sample of monthly
rents for one-bedroom apartments presented
here as grouped data in the form of a frequency
distribution.
Rent ($) Frequency
420-439 8
440-459 17
460-479 12
480-499 8
500-519 7
520-539 4
540-559 2
560-579 4
580-599 2
600-619 6
Slide 55
 Example: Apartment Rents
Mean for Grouped Data
Rent ($) fi Mi f iMi
34 , 525
420-439 8 429.5 3436.0 x= = 493. 21
440-459 17 449.5 7641.5 70
460-479 12 469.5 5634.0 This approximation
480-499 8 489.5 3916.0 differs by $2.41
500-519 7 509.5 3566.5
from the actual
520-539 4 529.5 2118.0
sample mean of
540-559 2 549.5 1099.0
$490.80.
560-579 4 569.5 2278.0
580-599 2 589.5 1179.0
600-619 6 609.5 3657.0
Total 70 34525.0

Slide 56
 Variance for Grouped Data
Sample Data

 f ( M − x ) 2
s2 = i i
n −1
Population Data

 f ( M −  ) 2
2 = i i
N

Slide 57
 Example: Apartment Rents
Variance for Grouped Data

s 2 = 3, 017.89

Standard Deviation for Grouped Data

s = 3, 017.89 = 54. 94
This approximation differs by only $.20
from the actual standard deviation of $54.74.

Slide 58