1 - Introduction To Statistics - Jan-2, 2012 (Compatibility Mode) PDF

Statistics for Management
Dedicated to
Professor. S. G. Deshmukh
Ramesh Anbanandam ramesh@nitc.ac.in Department of Mechanical Engineering, NIT Calicut Kerala, India -673 601.
ramesh.anbanandam@gmail.com 1
Objectives of this course

Appreciate the role of statistics in various decision making situations Summarize data with frequency distributions and graphic presentation. Interpret descriptive statistics for central tendency, dispersion and location Define and interpret probability. Utilize discrete and continuous probability distributions to determine probabilities in various managerial applications. Apply the central limit theorem to determine probabilities of sample means and compute and interpret point and interval estimates. Conduct Hypothesis tests for means Utilize linear regression to estimate and predict variables. Understand basic concepts of design-of-experiment Understand importance of non-parametric tests
Lab/tutorial
The laboratory content will require prerequisite of working with Excel. There will be quizzes/assignments every week. The lab assignments are to be submitted on that day itself. Students will be also required to visit and consult useful web resources.
ramesh.anbanandam@gmail.com
Mode of Evaluation and Grades

Grades are based on total points earned from test 1 &2,lab/tutorial/assignments, mini-project and end semester examination.
Test 1 Test 2 End Semester Lab/tutorial /assignments (every week) 10 % MiniProject Surprise quizzes
Reference
Meyer PL, Introductory Probability and Statistical Applications, Oxford and IBH Publishers Miller IR, Freund JE, Johnson R, Probability and Statistics for Engineers, Prentice-Hall (I) Ltd Walpole RE and Myers RH, Probability & Statistics for Engineers and Scientists, Macmillan Levin, R. I. and Rubin, D.S., Statistics for Management (Pearson Education ) Levine,David., Stephan,David., Krehbiel, Timothy and Berenson, Mark., Statistics for Managers using Microsoft Excel, Prentice Hall
5 ramesh.anbanandam@gmail.com 6
15 %
15 %
40 %
10%
10%
Page 1
Statistics..
Plays an important role in many facets of human endeavour Occurs remarkably frequently in our everyday lives It is often incorrectly thought of as just a collection of data, graphs and diagrams
Statistics in Business
Accounting auditing and cost estimation Economics regional, national, and international economic performance Finance investments and portfolio management Management human resources, compensation, and quality management Management Information Systems (ERP): performance of systems which gather, summarize, and disseminate information to various managerial levels Marketing market analysis and consumer research International Business market and demographic analysis
What is Statistics?
Science of gathering, analyzing, interpreting, and presenting data Branch of mathematics Facts and figures Measurement taken on a sample Statistics is the scientific method that enables us to make decisions as responsibly as possible.
Statistics
The science of data to answer research questions
Formulate a research question(s) (hypothesis) Collect data Analyze and summarize data Draw conclusions to answer research questions
Statistical Inference
In the presence of variation

Answers Questions from Everyday Life

Business: Will a new marketing strategy be profitable? Industry: Will a products life exceed the warranty period? Medicine: Will this years flu vaccine reduce the chance of flu? Education: Will technology improve learning? Government: Will a change in interest rates affect inflation?
Statistics: Science of variability..?

Virtually everything varies Variation occurs among individuals Variation occurs within any one individual as time passes
11
12
Page 2
Can Statistics Be Trusted?

There are three kinds of lies: Lies, damned lies, and statistics.
--Mark Twain
Population Versus Sample

Population the whole
a collection of persons, objects, or items under study The entire group of individuals in a statistical study we want information about.
It is easy to lie with statistics. But it is easier to lie without them.

--Frederick Mosteller
Census gathering data from the entire population Sample a portion of the whole
a subset of the population a part of the population from which we actually collect information, used to draw conclusions about the whole (statistical inference
Figures wont lie but liars will figure.

--Charles Grosvenor
Statistics can be split into two broad categories

1. Descriptive statistics 2. Statistical inference
Descriptive Statistics
Collect data
ex. Survey
Present data
ex. Tables and graphs
Characterize data
ex. Sample mean =
X
n
15
Descriptive statistics..
Encompasses the following:
Graphical or pictorial display Condensation of large masses of data into a form such as tables Preparation of summary measures to give a concise description of complex information (e.g. an average figure) Exhibition of patterns that may be found in sets of information
Inferential Statistics
Estimation
ex. Estimate the population mean weight using the sample mean weight
Hypothesis testing
ex. Test the claim that the population mean weight Drawing conclusions and/or making decisions is 120 pounds
concerning a population based on sample results.
Page 3
Inferential Statistics..
Especially relates to:
Determining whether characteristics of a situation are unusual or if they have happened by chance Estimating values of numerical quantities and determining the reliability of those estimates Using past occurrences to attempt to predict the future
Process of Inferential Statistics

Calculate x to estimate
Population
Sample x (statistic )
(parameter)
Select a random sample

19
Population vs. Sample

Population Sample
Parameter vs. Statistic

Parameter descriptive measure of the population
Usually represented by Greek letters
Statistic descriptive measure of a sample

Measures used to describe the population are called parameters Measures computed from sample data are called statistics
Usually represented by Roman letters

Symbols for Population Parameters

denotes population parameter
Symbols for Sample Statistics

x denotes sample mean
denotes population variance
denotes sample variance
denotes population standard deviation
S denotes sample standard deviation
23
24
Page 4
Types of Variables
Categorical (qualitative) variables have values that can only be placed into categories, such as yes and no. Numerical (quantitative) variables have values that represent quantities.
Types of Variables
Data
Categorical
Examples: Marital Status Political Party Eye Color (Defined categories)
Numerical
Discrete
Examples: Number of Children Defects per hour (Counted items)
Continuous
Examples: Weight Voltage (Measured characteristics)
Levels of Data Measurement

Nominal Lowest level of measurement Ordinal Interval Ratio Highest level of measurement
Levels of Measurement
A nominal scale classifies data into distinct categories in which no ranking is implied.
Categorical Variables
Personal Computer Ownership Type of Stocks Owned Internet Provider
Categories
Yes / No Growth Value Other Microsoft Network / AOL
27
An ordinal scale classifies data into distinct categories in which ranking is implied
Categorical Variable Student class designation Product satisfaction Faculty rank Standard & Poors bond ratings Student Grades Ordered Categories Freshman, Sophomore, Junior, Senior Satisfied, Neutral, Unsatisfied Professor, Associate Professor, Assistant Professor, Instructor AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, D A, B, C, D, F
An interval scale is an ordered scale in which the difference between measurements is a meaningful quantity but the measurements do not have a true zero point. A ratio scale is an ordered scale in which the difference between the measurements is a meaningful quantity and the measurements have a true zero point.
Page 5
Interval and Ratio Scales
Usage Potential of Various Levels of Data

Ratio Interval Ordinal Nominal
32
Data Level, Operations, and Statistical Methods

Data Level Nominal Ordinal Interval Meaningful Operations Classifying and Counting All of the above plus Ranking All of the above plus Addition, Subtraction All of the above plus multiplication and division Statistical Methods Nonparametric Nonparametric Parametric
Data preparation rules

Data presented must be
factual relevant
Ratio
Parametric
Before presentation always check: the source of the data that the data has been accurately transcribed the figures are relevant to the problem
Methods of visual presentation of data

Table
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 20.4 27.4 90 20.4 30.6 38.6 34.6 31.6 45.9 46.9 45 43.9

Graphs
90 80 70 60 50 40 30 20 10 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East West North
East West North
35
36
Page 6

Pie chart

Multiple bar chart
4th Qtr
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
3rd Qtr
2nd Qtr
North West East
1st Qtr
0
20
40
60
80
100
38

Simple pictogram
Frequency distributions
Frequency tables
Observation Table Frequency Cumulative Frequency 13 13 18 31 25 56 15 71 9 80
100 80 60 40 20 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East
West
North
Class Interval < 20 <40 <60 <80 <100
39
40
Frequency diagrams
Frequency 30 25 20 15 10 5 0 < 20 <40 <60 <80 <100 Frequency
Ungrouped Versus Grouped Data

Ungrouped data
Cumulative Frequency
Cumulative Frequency 90 80 70 60 50 40 30 20 10 0 < 20

Frequency
have not been summarized in any way are also called raw data
Grouped data
<40 <60 <80 <100
30 25 20 15 10 5 0 < 20 <40 <60 <80 <100 Frequency
have been organized into a frequency distribution
41
42
Page 7
Example of Ungrouped Data

42 30 53 50 52 30 55 49 61 74 26 58 40 40 28 36 30 33 31 37 32 37 30 32 23 32 58 43 30 29 34 50 47 31 35 26 64 46 40 43 57 30 49 40 25 50 52 32 60 54
Frequency Distribution of Ages

Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80
43
Ages of a Sample of Managers from XYZ
Frequency 6 18 11 11 3 1
Data Range
42 30 53 50 52 30 55 49 61 74 26 58 40 40 28 36 30 33 31 37 32 37 30 32 23 32 58 43 30 29 34 50 47 31 35 26 64 46 40 43 57 30 49 40 25 50 52 32 60 54
Number of Classes and Class Width

The number of classes should be between 5 and 15. Fewer than 5 classes cause excessive summarization. More than 15 classes leave too much detail. Class Width Divide the range by the number of classes for an approximate class width
Range = Largest - Smallest = 74 - 23 = 51
Round up to a convenient number
Smallest Largest
Approximat e Class Width =
51 = 8.5 6 Class Width = 10

46
45
Class Midpoint
beginning class endpoint + ending class endpoint 2 30 + 40 = 2 = 35
1 class width 2
Relative Frequency
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total
47
Class Midpoint =
Class Midpoint = class beginning point + = 30 + = 35 1 (10) 2
Frequency 6 18 11 11 3 1 50
Relative Frequency .12 6 = .36 50 .22 18 = 50 .22 .06 .02 1.00

48
Page 8
Cumulative Frequency
Cumulative Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 Total Frequency 6 18 11 11 3 1 50 Frequency 6 18 + 6 24 11 + 24 35 46 49 50
Class Midpoints, Relative Frequencies, and Cumulative Frequencies

Relative Cumulative
Class IntervalFrequency Midpoint Frequency Frequency 20-under 30 6 25 .12 6 30-under 40 18 35 .36 24 40-under 50 11 45 .22 35 50-under 60 11 55 .22 46 60-under 70 3 65 .06 49 70-under 80 1 75 .02 50 Total 50 1.00
Cumulative Relative Frequencies

Relative Cumulative Cumulative Relative Class IntervalFrequency Frequency Frequency Frequency 20-under 30 6 .12 6 .12 30-under 40 18 .36 24 .48 40-under 50 11 .22 35 .70 50-under 60 11 .22 46 .92 60-under 70 3 .06 49 .98 70-under 80 1 .02 50 1.00 Total 50 1.00
Common Statistical Graphs

Histogram -- vertical bar chart of frequencies Frequency Polygon -- line graph of frequencies Ogive -- line graph of cumulative frequencies Pie Chart -- proportional representation for categories of a whole Stem and Leaf Plot Pareto Chart Scatter Plot
52
Histogram
Class Interval Frequency 20-under 30 6 30-under 40 18 40-under 50 11 50-under 60 11 60-under 70 3 70-under 80 1
20
Histogram Construction
Frequency
Frequency
10
10 20 30 40 50 60 70 80 Years
0 0
10
20
10 20 30 40 50 60 70 80 Years
53
54
Page 9
Frequency Polygon
20
Ogive
Cumulative Class Interval Frequency 20-under 30 6 30-under 40 24 40-under 50 35 50-under 60 46 60-under 70 49 70-under 80 50
Fre quency 10
Frequency
0 0
20
40
60
10 20 30 40 50 60 70 80 Years
10
20
30
40 Years
50
60
70
80
55
56
Relative Frequency Ogive

Cumulative Relative Frequency .12 .48 .70 .92 .98 1.00
Complaints by Passengers
COMPLAINT NUMBER 28,000 14,700 10,500 9,800 7,000 70,000 PROPORTION .40 .21 .15 .14 .10 1.00 DEGREES 144.0 75.6 50.4 50.6 36.0 360.0
58
Cumulative Relative Frequency
Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80
1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0 10 20 30 40 Years 50 60 70 80
Stations, etc. Train Performance Equipment Personnel Schedules, etc. Total
57
Complaints by Passengers
Company
Personnel 14% Equipment 15% Schedules, Etc. 10%
2d Quarter Truck Production 357,411 354,936 160,997 34,099 12,747 920,190
A B
Train Performance 21%
Stations, Etc. 40%
Second Quarter Truck Production

59
C D E Totals
60
Page 10
Second Quarter Truck Production

17% 4% 1%
Pie Chart Calculations for Company A

Company A B 2d Quarter Truck Production 357,411 Proportion .388 .386 .175 Degrees 140 139 63 13 5 360
62
39% 39%
C D
357,411 = 920,190
354,936 160,997 34,099 12,747 920,190
.388 360 = .037

.014 1.000
E Totals
61
Pareto Chart
100 90 80 70 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Poor Wiring Short in Coil Defective Plug Other
15 9 15 7 5 Registered Vehicles (1000's)
Scatter Plot
Gasoline Sales (1000's of Gallons)
Gasoline Sales
Frequency
60 50 40 30 20 10 0
200
60 120 90
100
140 60
10 15 Registered Vehicles
20
63
64
Principles of Excellent Graphs

The graph should not distort the data. The graph should not contain unnecessary adornments (sometimes referred to as chart junk). The scale on the vertical axis should begin at zero. All axes should be properly labeled. The graph should contain a title. The simplest possible graph should be used for a given set of data.
Graphical Errors: Chart Junk

Bad Presentation Minimum Wage
1960: $1.00 1970: $1.60
Good Presentation
$
4 2
Minimum Wage
1980: $3.10
0
1990: $3.80
1960
1970
1980
1990
Page 11
Graphical Errors: Compressing the Vertical Axis

Bad Presentation
200 100 0 Q1 Q2 Q3 Q4
Graphical Errors: No Zero Point on the Vertical Axis

Bad Presentation
$ 45 42 Monthly Sales 45 42 39 36 J F M A M J 0 J F M A M J
Good Presentation
50 25 0 Q1 Q2 Q3 Q4
Good Presentations
$ Monthly Sales
Quarterly Sales
Quarterly Sales
39 36
Graphing the first six months of sales
http://www.stats.gla.ac.uk/steps/glossary/p resenting_data.html http://www.ilir.uiuc.edu/courses/lir593/
Thank You
69
Page 12

1 - Introduction To Statistics - Jan-2, 2012 (Compatibility Mode) PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1 - Introduction To Statistics - Jan-2, 2012 (Compatibility Mode) PDF

Uploaded by

Copyright:

Available Formats

Statistics for Management

Objectives of this course

Mode of Evaluation and Grades

In the presence of variation

Answers Questions from Everyday Life

Statistics: Science of variability..?

Can Statistics Be Trusted?

Population Versus Sample

It is easy to lie with statistics. But it is easier to lie without them.

Figures wont lie but liars will figure.

Statistics can be split into two broad categories

concerning a population based on sample results.

Process of Inferential Statistics

Select a random sample

Population vs. Sample

Parameter vs. Statistic

Statistic descriptive measure of a sample

Usually represented by Roman letters

Symbols for Population Parameters

Symbols for Sample Statistics

denotes population variance

denotes sample variance

denotes population standard deviation

S denotes sample standard deviation

Levels of Data Measurement

Interval and Ratio Scales

Usage Potential of Various Levels of Data

Data Level, Operations, and Statistical Methods

Data preparation rules

Methods of visual presentation of data

Methods of visual presentation of data

East West North

Methods of visual presentation of data

Methods of visual presentation of data

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

North West East

Methods of visual presentation of data

Class Interval < 20 <40 <60 <80 <100

Ungrouped Versus Grouped Data

Cumulative Frequency 90 80 70 60 50 40 30 20 10 0 < 20

30 25 20 15 10 5 0 < 20 <40 <60 <80 <100 Frequency

have been organized into a frequency distribution

Example of Ungrouped Data

Frequency Distribution of Ages

Ages of a Sample of Managers from XYZ

Number of Classes and Class Width

Range = Largest - Smallest = 74 - 23 = 51

Round up to a convenient number

Approximat e Class Width =

51 = 8.5 6 Class Width = 10

Class Midpoint = class beginning point + = 30 + = 35 1 (10) 2

Relative Frequency .12 6 = .36 50 .22 18 = 50 .22 .06 .02 1.00

Class Midpoints, Relative Frequencies, and Cumulative Frequencies

Cumulative Relative Frequencies

Common Statistical Graphs

Relative Frequency Ogive

Cumulative Relative Frequency

Class Interval 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80

Stations, etc. Train Performance Equipment Personnel Schedules, etc. Total

2d Quarter Truck Production 357,411 354,936 160,997 34,099 12,747 920,190

Train Performance 21%

Stations, Etc. 40%

Second Quarter Truck Production