Quantitative Method for Multi-

dimensional Management and

Group Decision Making*

Methods for Describing

Sets of Data
Class 1

1-1
 Numerical Methods
for Quantitative Data

1-2
 Describing Data

Data

Qualitative Quantitative
Data Data
Many

Graphical Numerical Graphical Numerical

Methods Methods Methods Methods

1-3
 Standard Notation

Measure Sample Population

Mean X µ
Stand. Dev. S σ
2 2
Variance S σ
Size n N

1-4
 Quantitative Data
Properties

Central Tendency
(Location)

1-5
 Quantitative Data
Properties

Central Tendency
(Location)

Variation
(Dispersion)

1-6
 Quantitative Data
Properties

Central Tendency
(Location)

Variation
(Dispersion)

Shape

1-7
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Tendency Variation Shape

Mean Range Skew

Median Interquartile Range
Mode Variance
Standard Deviation

1-8
 Central Tendency

1-9
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 10
 Mean

1. Measure of central tendency

2. Most common measure
3. Acts as ‘balance point’
4. Affected by extreme values (‘outliers’)

1 - 11
 Mean

1. Measure of central tendency

2. Most common measure
3. Acts as ‘balance point’
4. Affected by extreme values (‘outliers’)
5. Formula (sample mean)
n

∑ Xi X1 + X 2 +  + X n
i =1
X= =
1 - 12
n n
 Mean Example

Raw Data: 10.3 4.9 8.9 11.7 6.3 7.7

n

∑ Xi X1 + X 2 + X 3 + X 4 + X 5 + X 6
i =1
X= =
n 6
10.3 + 4.9 + 8.9 + 11.7 + 6.3 + 7.7
=
6
= 8.30
1 - 13
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 14
 Median

1. Measure of central tendency

2. Middle value in ordered sequence
 If odd n, middle value of sequence
 If even n, average of 2 middle values

1 - 15
 Median

1. Measure of central tendency

2. Middle value in ordered sequence
 If odd n, middle value of sequence
 If even n, average of 2 middle values
3. Position of median in sequence
n +1
Positioning Point =
2

1 - 16
 Median

1. Measure of central tendency

2. Middle value in ordered sequence
 If odd n, middle value of sequence
 If even n, average of 2 middle values
3. Position of median in sequence
n +1
Positioning Point =
2
4. Not affected by extreme values
1 - 17
 Median Example
Odd-Sized Sample

Raw Data: 24.1 22.6 21.5 23.7 22.6

Ordered: 21.5 22.6 22.6 23.7 24.1
Position: 1 2 3 4 5

n +1 5 +1
Positioning Point = = = 3.0
2 2
Median = 22.6

1 - 18
 Median Example
Even-Sized Sample

Raw Data: 10.3 4.9 8.9 11.7 6.3 7.7

Ordered: 4.9 6.3 7.7 8.9 10.3 11.7
Position: 1 2 3 4 5 6

n +1 6 +1
Positioning Point = = = 3.5
2 2
7.7 + 8.9
Median = = 8.30
2
1 - 19
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 20
 Mode

1. Measure of central tendency

2. Value that occurs most often
3. Not affected by extreme values
4. May be no mode or several modes
5. May be used for quantitative &
qualitative data

1 - 21
 Mode Example

No Mode
Raw Data: 10.3 4.9 8.9 11.7 6.3 7.7
One Mode
Raw Data: 6.3 4.9 8.9 6.3 4.9 4.9
More Than 1 Mode
Raw Data: 21 28 28 41 43 43

1 - 22
 Thinking Challenge

You’re a financial analyst

for Prudential-Bache
Securities. You have
collected the following
closing stock prices of
new stock issues: 17, 16,
21, 18, 13, 16, 12, 11.
Describe the stock prices
in terms of central
tendency.
1 - 23 Alone Group Class
 Central Tendency
Solution*

Mean
n

∑ Xi X1 + X 2 +  + X 8
i =1
X= =
n 8
17 + 16 + 21 + 18 + 13 + 16 + 12 + 11
=
8
= 15.5
1 - 24
 Central Tendency
Solution*

Median
Raw Data: 17 16 21 18 13 16 12 11
Ordered: 11 12 13 16 16 17 18 21
Position: 1 2 3 4 5 6 7 8
n +1 8 +1
Positioning Point = = = 4.5
2 2
16 + 16
Median = = 16
1 - 25
2
 Central Tendency
Solution*

Mode
Raw Data: 17 16 21 18 13 16 12 11
Ordered: 11 12 13 16 16 17 18 21

1 - 26
 Summary of
Central Tendency Measures
Measure Equation Description
Mean Σ Xi / n Balance Point
Median (n+1) Position Middle Value
2 When Ordered
Mode none Most Frequent

1 - 27
 Variation

1 - 28
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 29
 Range

1. Measure of dispersion
2. Difference between largest & smallest
observations
Range = X l argest − X smallest
3. Ignores how data are distributed

7 8 9 10 7 8 9 10
1 - 30
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 31
 Variance &
Standard Deviation

1. Measures of dispersion
2. Most common measures
3. Consider how data are distributed

1 - 32
 Variance &
Standard Deviation

1. Measures of dispersion
2. Most common measures
3. Consider how data are distributed
4. Show variation about mean (X or µ)
 X = 8.3

4 6 8 10 12
1 - 33
 Sample Variance
Formula
n

∑cX i − Xh
2

2 i =1
S =
n −1

=
cX − Xh +cX − Xh +  +cX − Xh
1
2
2
2
n
2

n −1

1 - 34
 Sample Variance
Formula
n

∑c h 2
Xi − X n - 1 in denominator!
(Use N if Population
2 i =1
S = Variance)
n −1

=
cX − Xh +cX − Xh +  +cX − Xh
1
2
2
2
n
2

n −1

1 - 35
 Sample Standard
Deviation Formula

S = S2

∑cX i − Xh
2

i =1
=
n −1

=
cX − Xh +cX − Xh +  +cX − Xh
1
2
2
2
n
2

n −1
1 - 36
 Variance Example

Raw Data: 10.3 4.9 8.9 11.7 6.3 7.7

n n

∑cX i − Xh
2
∑ Xi
S2 = i =1
where X = i =1
= 8.3
n −1 n

S 2
=
a10.3 − 8.3f +a4.9 − 8.3f +  +a7.7 − 8.3f
2 2 2

6 −1
= 6.368
1 - 37
 Thinking Challenge

You’re a financial analyst

for Prudential-Bache
Securities. You have
collected the following
closing stock prices of
new stock issues: 17, 16,
21, 18, 13, 16, 12, 11.
What are the variance
and standard deviation
of the stock prices?
1 - 38 Alone Group Class
 Variation Solution*

Sample Variance
Raw Data: 17 16 21 18 13 16 12 11
n n

∑cX i − Xh
2

2
∑ Xi
i =1 i =1
S = where X = = 15.5
n −1 n

S 2
=
a17 − 15.5f +a
2
16 − 15.5f +  +a
2
11 − 15.5f
2

8 −1
= 11.14
1 - 39
 Variation Solution*

Sample Standard Deviation

n

∑cX i − Xh
2

2 i =1
S= S = = 11.14 = 3.34
n −1

1 - 40
 Summary of
Variation Measures
Measure Equation Description
Range Xlargest - Xsmallest Total Spread
Interquartile Range Q3 - Q1 Spread of Middle 50%

∑ (X
Standard Deviation 2 Dispersion about
i
− X)
(Sample) Sample Mean
n −1
Standard Deviation Dispersion about
∑ (Xi
2
− µ)
(Population) Population Mean
N
Variance Σ(Xi -X )2 Squared Dispersion
(Sample) n-1 about Sample Mean

1 - 41
 Shape

1 - 42
 Numerical Methods
for Quantitative Data
Numerical Data
Properties

Central
Variation Shape
Tendency
Mean Range Skew
Median Interquartile Range
Mode Variance
Standard Deviation

1 - 43
 Shape

1. Describes how data are distributed

2. Measured by skew (symmetry)

1 - 44
 Shape

1. Describes how data are distributed

2. Measured by skew (symmetry)

Symmetric
Mean= Median= Mode

1 - 45
 Shape

1. Describes how data are distributed

2. Measured by skew (symmetry)

Left-Skewed Symmetric
Mean Median Mode Mean= Median= Mode

1 - 46
 Shape

1. Describes how data are distributed

2. Measured by skew (symmetry)

Left-Skewed Symmetric Right-Skewed

Mean Median Mode Mean= Median= Mode Mode Median Mean

1 - 47