BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011

1
Suggested Reading:
Oakshott: Chapter 5 and 6
Lecture 2
Measures of Dispersion
Objectives
Calculate and interpret the range, interquartile range,
and standard deviation from sets of data.

Appreciate the relative merits of these measures of
dispersion and understand the circumstances where
their use would be appropriate.
Measurement of Data
Measure of location
Measure the average or expected value of
the data

Measure of spread or dispersion
Measure the variation / variability of the
data
Measure of Dispersion
If all data are identical
variation is zero

If all data diverse
variation is increasing


BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
2
Data: Age
Group 1:
19 19 19 19 19

Group 2:
19 18 17 19 20

What is the difference?
Measure of Spread/Dispersion
The main measures that we will be concerned with
are

The range
The interquartile range
The standard deviation
The variance
The coefficient of variation
Range
Range = max min
Of limited use as it ignores all observations except the
highest and lowest easily distorted by extreme
values.

Example
Data set A: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11
Data set B: 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 11
Interquartile Range
Range of the central 50% of the data

Calculation:
1. Find the lower quartile Q1 of the data
2. Find the upper quartile Q3 of the data
3. The interquartile range = Q3 - Q1
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
3
Example
Find the interquartile range for the following set of data.
5, 2, 7, 3, 4, 5, 8, 10, 12, 8


Solution: Rearranging the data in order


The Interquartile Range for a Frequency
Distribution
Plot a cumulative frequency ogive

Draw a horizontal lines at the 25% and 75% level

Drop vertical lines where these horizontal lines cut
the ogive

This gives you the two quartiles

The IQR is the difference between the quartiles

Example: Commuting time
Cumulative Frequency Chart
0
25
50
75
100
0 20 40 60 80 100
Commuting time (minutes)
C
u
m
u
l
a
t
i
v
e

%

a
g
e

o
f

c
o
m
m
u
t
e
r
s
Box-and-whisker plot
The box shows the median and interquartile range
while the whiskers extend from the box to the most
extreme values at both ends of the data.

Useful for comparing 2 sets of data
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
4
Example: Commuting time data
0 25 35 50 100
Note that the data is right-skewed.
Standard Deviation
The standard deviation all data values into
account

Standard deviation o or as o
n


=


is the sum of the deviations from the
mean of all the observations.
( )
n
x x
2
) x x (
Calculate the standard deviation of the
observations below, which represent the pay of 5
assembly line workers:

124 160 124 145 132
Example of Calculation
Deviation from the Mean
120 140 160
124
132
145
160
Mean
137
-13
-5
8
23
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
5
Deviation Squared deviation
Observation
124
160
124
145
132
Totals 685
) ( x x
2
) ( x x
When the standard deviation of a population is
estimated from a sample, the result tends to be
an underestimate. To reduce this tendency, the
formula is usually modified to:

Standard deviation, o
n-1
=
( )
1 n
x x
2

This is known as the sample standard deviation
and is usually indicated as o
n-1
.
1. Press MODE to enter the SD 1 mode .
2. Press SHIFT CLR Scl AC to clear the
Statistical memory
3. Enter data
4. Press SHIFT S-VAR 1 = for the Mean
5. Press SHIFT S-VAR 2 xn = for the
Standard deviation using n (population)
6. Press SHIFT S-VAR 3 xn-1 = for the
Standard deviation using n-1 (sample)
Using Calculator model fx-570MS
Activity 1:
Use the calculator to find the mean and standard
deviation (sample) of the following data:
The number of sales made by two sales persons over
the past few days has been as follows:
Mike: 3, 2, 1, 32, 2, 1, 1
Janet: 0, 1, 4, 12, 10, 7, 8, 6
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
6
Standard deviation of a frequency
distribution
Standard deviation
=


The manual equivalent formula is

( )

f
x x f
2
2
2
|
|
.
|

\
|

f
fx
f
fx
Example



Spreadsheet can be used to find the s.d.
=
|
|
.
|

\
|
E
E

E
E
2
2
f
fx
f
fx
Using Calculator
Press MODE 2 to enter the SD mode.
Press SHIFT Scl = to clear the Statistical
memory
Enter data: Separate the mid point value and
frequency by semicolon [;] Press SHIFT [;]
Press SHIFT S-VAR 1 = for the Mean
Press SHIFT S-VAR 2 xn = for the
Standard deviation using n (population)
Press SHIFT S-VAR 3 xn-1 = for the
Standard deviation using n-1 (sample)
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
7
Activity 2:
Wages (s) No. of employees
20 to under 30 2
30 to under 40 4
40 to under 50 6
50 to under 60 12
60 to under 70 9
70 to under 80 11
80 to under 90 1
Use the calculator to find the mean and standard
deviation of the data below:
Interpreting the Standard deviation
The greater the variation in the data the greater the
standard deviation

If there is no variation in the data (i.e., all the
observations are the same) then the standard deviation
will be zero.

Variation standard deviation
The variance is simply the square of the standard
deviation.
Variance
Standard deviation is more practical measure of
spread as compared to variance.
Why???
What happens to the Standard deviation if you:

(i) Add or subtract a constant number to each
value?

(ii) Multiply a constant number to each value?

Revision:
Textbook: pp. 133 - Activity 6.16 & 6.17.
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
8
Example:
Data set 1:
5, 6, 7, 9, 23

Data set 2:
5000, 6000, 7000, 9000, 23000

Compare the mean and standard deviation.
What is your conclusion?
Example:
Data set 1:
Mean =
SD =
Data set 2:
Mean =
SD =

Does data set 2 has greater variation?
Relative variation within each data set is the
same.
Comparing the SD or variation of two or
more data sets is not a good idea unless their
mean values are approximately equal.
Coefficient of Variation
Useful for comparing the variation between
two data sets.

Coefficient of variation
=
% 100 x
Mean
dev Std
Example
Suppose that the cash in the bank at the end
of the day for two companies has the means
and standard deviations shown below:

Mean Standard deviation
Company A 50,000 2000
Company B 5000 2000

Which company might have a cash flow problem?
BSDMA (UFMEEP-20-1) LECTURE 2 8/10/2011
9
The coefficient of variation for
company A =
company B =
Activity 3:
The price of two stocks
are shown over a 12-
month period. Describe
the variability of the
stocks.
Which stock appears to
be more stable? Why?
Month Stock A Stock B
Jan 10 30
Feb 11 33
Mar 12 36
Apr 11 32
May 15 45
June 18 49
July 13 37
Aug 16 48
Sep 11 33
Oct 10 30
Nov 9 33
Dec 13 39
CV for
Stock A =


Stock B =

Mean for
Stock A =
Stock B =

SD for
Stock A =
Stock B =
Conclusion: