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Formula Sheet for Statistics

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PROBABILITY

Probability of any event: 0 P (event) 1

Permutation: subsets of r elements from n different

elements

n!

Prn n (n 1) (n 2) (n r 1)

(n r )!

Permutation of similar objects: n1 is of one type, n2 is of

second type, among n = n1+n2++nr elements

n!

n1 ! n 2 ! n3 ! n r !

Combinations: subsets of size r from a set of n elements

n

n!

nC r C rn

r r!(n r )!

Independent Events:

P(AB) = P(A or B) = P(A) + P(B) P(A and B)

P(ABC) = P(A) + P(B) + P(C) P(AB) P(AC) - P(AB) = P(A and B) = P(A)P(B)

P(A|B) = P(A)

P(BC) + P(ABC)

P(B|A)=P(B)

P(B) = P(BA) + P(BA) = P(B|A)P(A)+P(B|A)P(A)

Dependent Events:

For Mutually exclusive events AB=:

P(A and B) = P(A) * P(B given A)

P(AB) = P(A or B) = P(A) + P(B)

P(AB)=P(A|B)P(B)=P(BA)=P(B|A)P(A)

P(A and B and C) = P(A) * P(B | A) * P(C given

A and B)

Bayes Theorem

P(AB) = P(AB) = P(A | B) P(B) = P(B | A) P(A)

P(B | A) P( A)

P( AB)

P( A | B )

Conditiona l Probabilit y P( A | B )

P (B | A) P( A) P (B | A) P( A)

P(B )

A, B

= any two events

A

= complement of A

Markovs Inequality

Chebyshevs Inequality

If X is a non-negative random variable with mean , then If X is a random variable with a finite mean

for any constant a > 0

and variance 2, then for any constant a > 0

2

P(X a)

P( X - a) 2

a

a

DECISION ANALYSIS

Criterion of Realism

Expected Monetary Value

Weighted average = (best in row) + (1 )(worst in

EMV(altern ative) = X i P ( X i )

row)

Xi = payoff for the alternative in state of

nature i

For Minimization:

P(Xi) = probability of achieving payoff Xi (i.e.,

Weighted average = (best in row) + (1 )(worst in

probability of state of nature i)

row)

= summation symbol

EMV (alternative i) = (payoff of first state of nature) x

Expected Value with Perfect Information

(probability of first state of nature) + (payoff of second

EVwPI = (best payoff in state of nature i)

state of nature) x (probability of second state of nature) +

(probability of state of nature i)

+ (payoff of last state of nature) x (probability of last

EVwPI = (best payoff for first state of nature) x

state of nature)

(probability of first state of nature) + (best

payoff for second state of nature) x (probability

of second state of nature) + + (best payoff for

last state of nature) x (probability of last state of

nature)

EVSI = (EV with SI + cost) (EV without SI)

Utility of other outcome = (p)(utility of best outcome,

which is 1) + (1 p)(utility of the worst outcome, which

is 0)

EVPI = EVwPI Best EMV

EVSI

Efficiency of sample informatio n =

100%

EVPI

Y 0 1 X

REGRESSION MODELS

Y b b X

0

X independen t variable (predictor or explanator y)

1 slope of the regression line

random error

Error = (Actual value) (Predicted value)

e Y Y

Y predicted value of Y

b0 estimate of 0 , based on sample results

b1 estimate of 1 , based on sample results

X

Y

b1

n

Y

n

( X X )(Y Y )

(X X)

b0 Y b1 X

2

Correlation Coefficient = r r

SSR

MSR

k

k number of independen t variable s in the model

Hypothesis Test H 0 : 1 0

H 1 : 1 0

Reject if Fcalculated F ,df1 , df 2

df 1 k df 2 n k 1

p - value P ( F calculated test statistic )

Reject if p - value

Y b0 b1 X 1 b2 X 2 ... bk X k

Y = predicted value of Y

b0 = sample intercept (an estimate of 0)

bi =

sample coefficient of the i th variable (an

estimate of i)

SSR

SSE

1

SST

SST

SSE

Mean Squared Error s 2 MSE

n k 1

Coefficien t of Determinat ion r 2

MSR

MSE

degrees of freedom for the numerator = df1 = k

degrees of freedom for the denominator = df2 = n

k1

F Statistic : F

Y=

dependent variable (response variable)

Xi = ith independent variable (predictor or

explanatory variable)

0 = intercept (value of Y when all Xi = 0)

i = coefficient of the ith independent variable

k=

number of independent variables

=

random error

SSE /( n k 1)

Adjusted r 2 1

SST /( n 1)

( )( )

yi

i=1

y i x i

x 2i

( )

i=1

i=1

S xy

S xx

xi

Where

xi

i=1

1

x =

n

( ) x y=(1 /n) y

i

i =1

i=1

Error of squares , SS E = e = ( y i ^y i) 2

2

i

i=1

i=1

SS

Unbiased estimator , ^ = E

n2

SS E =SST ^ 1 S xy

SS T = ( y i y )

i=1

^

S xx

[ ]

2

x

2 1

^

^

Estimated Standard error of theintercept , se ( 0 ) =

+

n S xx

Hypothesis Testing ( ttest )

Null hypothesis: H 0 : 1= 1,0

H 1 : 1 1,0

^1 1,0

Test Statistic: : T 0 :

Reject null hypothesis if

^ 2 /S xx

|t 0|>t /2, n2

H 0 : 0 =0,0

H 1 : 0 0,0

Null hypothesis:

Test Statistic: :

T0 :

^ 0 0,0

[ ]

1 x 2

^ 2 +

n S xx

|t 0|>t /2, n2

2

i=1

i=1

i=1

SS T =SS R + SS E

SS R /1

MS R

Test for signifance of Regression , F 0=

=

follows F 1,n2 distribution

SS E /(n2) MS E

Reject null hypothesis , if f 0> f , 1,n2

^ 1t

100 (1 ) CI of slope 0 is

^ 0t

100 (1 ) CI of slope 1 is

, n2

, n2

^ 2

^ 2

1 ^1 +t

,n2 S

S xx

xx

2

[ ]

[ ]

1 x 2

1 x 2

^ 2 +

0 ^ 0 +t

^ 2 +

, n2

n S xx

n S xx

2

0

^Y x t

0

,n2

[

^ 2

2

1 ( x0 x )

1 (x x )

+

Y x ^Y x +t

^ 2 + 0

, n2

n

S xx

n

S xx

2

0

]

4

100 (1 ) PI on a future observation Y 0 at the value x 0 is

0

2

2

1 ( x0 x )

2 1 ( x 0 x )

^y 0t

^

+

Y 0 ^y 0 +t

^

+

,n2

, n2

n

S xx

n

S xx

2

2

where ^y 0= ^ 0 + ^ 1 x 0 is computed theregression model

2

Residuals ei = y i^y i

d i=e i / ^ 2

Coefficient of determination, R2=

SS R

SS

=1 E

SST

SS T

]

CorrelationCoefficient , =

XY

X Y

R n2

T 0 = 2 has t distribution with n2degrees of freedom

1R

Reject null hypothesis , if |t 0|>t

Test for correlation : H 0 : =0

, n2

z

z /2

tanh arctanh r

tanh arctanh r + 2 where tanh u=( eu eu )/(e u + eu )

n3

n3

1

Fitted logistic expression, ^y =

1+exp [( 0 + 1 x ) ]

Multiple Regression

y= X+

y i= 0 + 1 x i 1+ 2 xi 2 ++ k x ik + i i=1,2, , n

[] [

y1

y

y= 2

yn

n

x

1 x 11 x12

1k

1 x 21 x22

x

X=

2k

1 xn 1 xn 2

x nk

i=1

i=1

n

[]

= 2

[]

= 2

n ^ 0+ ^1 x i1 + ^ 2 xi 2 ++ ^ k x ik = y i

i=1

i=1

i=1

n

i=1

n

i=1

i=1

i=1

^ x + ^ x 2 + ^ x x ++ ^ x x = x y

0

i1

1

i1

2

i1 i2

k

i 1 ik

i1 i

i=1

i=1

i=1

i=1

n

^ 0 x ik + ^1 x ik x i1 + ^ 2 x ik x i 2 ++ ^ k x 2ik= xik yi

Normal Equations : X X ^=X ' Y

i=1

'

n

n

xi 1

i =1

n

xi 1

xi 2

i=1

n

i=1

n

x 2i 1 x i 1 x i 2

n

x i 1 x ik

i=1

i=1

x ik x ik x i 1 xik x i 2

i=1

xik

i=1

n

i=1

i=1

x2ik

i=1

][ ]

n

i=1

[]

^0

^1

^ k

yi

i=1

n

xi 1 yi

i=1

x ik y i

i=1

1

Least square estimate of : ^=( X ' X ) X ' Y

n

e 2i

SS

Estimator of Variance , ^ 2= i=1 = E

n p n p

n

2

i

i=1

'

i=1

Covariance ,C=( X X)

Estimated standard error of ^ j =se ( ^ j ) = 2 Cij

Hypothesis of ANOVA Test

Null hypothesis: H 0 : 1= 2== k =0

SS R / k

MS R

Test statistic for ANOVA , F 0=

=

SS E /(np) MS E

Reject null hypothesis , if f 0> f , k ,n p

2

( )

yi

'

SS E = y y

i=1

'

i=1

( )

i=1

yi

Adjusted R2 , R2adj=

( )

yi

^ X y

SS R = ^ X ' y

SS R

SS

=1 E

SST

SS T

SS E /(n p)

SST /(n1)

H 0 : j= j , 0

H 1 : j j ,0

^ j j , 0 ^ j j , 0

T0 :

=

Reject null hypothesis if

2

se ( ^ )

^ C

Null hypothesis:

Test Statistic: :

ij

|t 0|>t /2, n p

H 0 : 1=0

H 1: 1 0

SS ( )/ r

F0 = R 1 2

MS E

Reject null hypothesis , if f 0> f , r ,n p . This concludes that at least one of parameters 1 is not zero .

100 (1 ) CI on theregression coefficient j j=0,1,2, , k is

^ t

j

^ C

2

,n p

ij

j ^ j+t

2

^ C

2

,n p

ij

^Y x t

0

^ x ( X X )

2

,n p

'

0

'

x 0 Y x ^ Y x + t

0

,n p

x'0 ( X ' X ) x 0

^y 0t

2

^ ( 1+ x ( X X )

2

,n p

'

0

'

x 0 ) Y 0 ^y 0 +t

2

Residuals ei = y i^y i

, n p

d i=

Studentized Residuals r i =

ei

^ (1h )

2

^ ( 1+ x ( X X )

'

0

'

x 0)

ei

=e i / ^ 2

MS E

Where i=1,2, , n

ii

1

^ H=X ( X ' X ) X '

1

'

'

hii =ith diagonal element of the H xi ( X X ) xi

'

Coo k sDistance

'

( ^ (i ) ^ ) X ' X ( ^ (i) ^ )

Di=

where i=1,2, , n

p ^ 2

r 2 hii

Di= i

where i=1,2, , n

p (1hii )

Stepwise Regression

SS R ( j 1 , 0 )

F j=

MS E (x j , x 1)

SS E (p)

n+ 2 p

2

^

Prediction Error of Squares

n

n

ei

PRESS= ( y i ^y(t )) 2=

i=1

i=1 1hii

C p Statistic ,C p=

( )

1

VIF ( j )=

Where j=1,2, , k

2

(1R j )

Single-Factor Experiments

a

i=1 j=1

i=1

i=1 j=1

SS T =SS Treatments + SS E

a

E ( SS Treatments ) =( a1 ) + n i

2

i=1

E ( SS E )=a ( n1 )

MS E =SS E /[a ( n1 )]

SS

/(a1) MS Treatments

F0 = Treatments

=

MS E

SS E /[a ( n1 ) ]

2

a

n

y ..

2

SS T = y ij

N

i=1 j=1

2

a

y i . y 2..

SS Treatments =

N

i=1 n

SS E =SST SSTreatments

Y

T = i . i has t distribution witha(n1) degrees of freedom

MS E /n

7

MS E

MS E

y i .t

i y i . + t

(

)

,a n1

,a (n1)

n

n

2

2

100 (1 ) CI on thedifference two treatment means i j ,is

2 MS E

2 MS E

y i . y j . t

i j y i . y j . +t

, a ( n1)

,a (n1 )

n

n

2

2

t 0=

Null Hypothesis H 0 : i= j wherei j

y i . y j .

2 MS E

n

Reject null hypothesis if | y i . y j .|> LSD

LSD=t

2

,a (n1)

2 MS E

n

2

, N a

MS E

( n1 + n1 )

i

Power of ANOVA test , 1=P { Reject H 0| H 0 is false }=P {F 0 > f ,a1,a (n1)H 0 is false }

a

2=

n 2i

i=1

a 2

MS

SS Treatments

E( Treatments)=E

= 2 +n 2

a1

MS

SS E

E( E)=E

= 2

a (n1)

2

^ =MS E

MS Treatments MS E

^ 2 =

n

a

i=1

j=1

i=1 j=1

i=1 j=1

E ( MS Treatments ) = 2 +

b 2i

i=1

a1

b

E ( MS Blocks )= 2+

a 2j

j=1

b1

8

E ( MS E ) = 2

SS

MS Treatments= Treatments

a1

SS

MS Blocks = Blocks

b1

SS E

MS E =

(a1)(b1)

2

a

b

y ..

2

SS T = y ij

ab

i=1 j=1

a

y 2..

1

2

SS Treatments = y i .

b i=1

ab

2

b

y..

1

2

SS Blocks = y . j

a j =1

ab

SS E =SST SSTreatments SS Blocks

e ij = y ij ^y ij

^y ij = y i . + y . j y ..

b

y i ..= y ijk

j=1 k=1

y i ..

wherei=1,2, , a

bn

y i ..=

y . j .= y ijk

i =1 k=1

y . j .=

y. j .

where j=1,2, ,b

an

n

y ij. = y ijk

k=1

y ij. =

y ij.

where i=1,2, , a

n

a

y ...= y ijk

i=1 j=1 k=1

y ...=

y ...

where j=1,2, , b

abn

a

SS T = ( y ijk y ... )2

i=1 j=1 k=1

i=1

j=1

i=1 j=1 k=1

i=1 j=1

i=1 j=

E ( MS A ) =E

SS

( a1

)= +

A

bn 2i

i=1

a1

E ( MS B ) =E

an 2j

2

SSB

= + j=1

b1

b1

( )

n ( )2ij

SS AB

E ( MS AB )=E

= + i=1 j=1

(a1)(b1)

(a1)(b1)

2

SS E

E ( MS E ) =E

=

ab (n1)

MS A

MS E

MS B

F Test for Factor B , F 0=

MS E

MS AB

F Test for AB Interaction , F 0=

MS E

2

a

b

n

y ...

2

SS T = y ijk

abn

i=1 j=1 k=1

2

2

a

y

y

SS A = i .. ...

abn

i=1 bn

2

2

b

y

y

SS B = . j . ...

abn

j=1 an

2

2

a

b

y

y

SS AB= ij . ... SS A SS B

abn

i=1 j=1 n

F Test for Factor A , F 0=

Three-Factor Fixed Effects Model

Source Sum

Degrees of

of

of

Freedom

Variati

Squar

on

es

A

SSA

a1

Mean

Squa

re

MSA

SSB

b1

MSB

SSC

c1

MSC

AB

SSAB

(a 1)(b 1)

MSAB

AC

SSAC

(a 1)(c 1)

MSAC

BC

SSBC

(b 1)(c 1)

MSBC

bcn 2i

+

a1

acn 2j

2+

b1

abn 2k

2+

c1

cn ()2ij

2+

(a1)(b1)

2

2 bn ( )ik

+

(a1)( c1)

2

2 an ( ) jk

+

(b1)(c1)

2

F0

MS A

MS E

MS B

MS E

MS C

MS E

MS AB

MS E

MS AC

MS E

MS BC

MS E

10

ABC

SSABC

(a 1)(b 1)(c

1)

MSABC

MS ABC

MS E

n ( )2ijk

(a1)(b1)(c1)

Error

SSE

abc(n 1)

MSE

2

Total

SST

abcn 1

2k Factorial Designs

(l) Represents the treatment combination with both factors at the low level.

a+ ab b+(l) 1

= [ a+abb(l) ]

2n

2n

2n

A+ y

Main Effect of Factor A : A= y

b+ab a+(l) 1

B=

= [ b+ aba(l) ]

2n

2n

2n

B+y

Main Effect of Factor B : B= y

ab+(l ) a+ b 1

Interaction Effect AB: AB=

= [ ab+ (l ) ab ]

2n

2n 2n

Contrast Coefficients are always+11. Contrast A =a+abb(l)

Contrast

Effect=

n 2k1

( Contrast )2

of squares for an effect , SS= n 2k

Y = 0 + 1 x 1 +

y

+

2

y

effect

Coefficienteffect , ^=

=

2

^

1

1

1

Standard error of a coefficient , standard error ^=

+ k1 =^

k1

2 n2

n2

n 2k

y

^

tstatistic for a coefficient , t=

=

standard error ^

2k Factorial Designs for k 3 factors

1

A=

[ a+ ab+ac +abc( 1 ) bcbc ]

4n

A + y

A= y

1

B=

[ b+ab+ bc+ abc( 1 )acac ]

4n

B+ y

B= y

A=

11

C=

1

[ c+ ac+bc +abc (1 )abab ]

4n

C+ y

C= y

1

[ abcbc +abbac+ ca+(1)]

4n

1

AC =

[ ( a ) a+babc +acbc+ abc ]

4n

1

BC =

[ ( 1 ) +ababcac +bc +abc ]

4n

1

ABC =

[ abcbcac+ cab+b +a(1)]

4n

Y = 0 + 1 x 1 + 2 x 2+ 12 x1 x 2+

y F y C 2

n F nC ( y F y C )2

SS Curvature =

=

n F +n C

1 1

+

nF nC

First order model :Y = 0+ 1 x 1+ 2 x2 + k x k +

AB=

( )

i=1

i=1

2

i< j

Steepest Ascent ^y = ^ 0+ ^i x i

i=1

i=1

i=1

2

Fitted Second order model ^y = ^ 0+ ^i x i+ ^ii x i + ^ ij x i x j

i< j

12

FORECASTING

(error ) 2

forecast error

Mean Squared Error (MSE)

n

n

error

actual

Mean Absolute Percent Error (MAPE)

100%

n

Y Yt 1 ... Yt n 1

sum of demands in previous n periods

Mean Average Forecast

Ft 1 t

n

n

Weighted Moving Average : Ft 1

(Weight

(Weights )

w1 w2 ... wn

New forecast Last period s forecast (Last period s actual demand Last period s forecast)

Exponentia l Smoothing with Trend :

Y b0 b1 X

Ft 1 FITt (Yt FIT t )

where Y predicted value

Tt 1 Tt (Ft 1 FIT t )

b0 intercept

FIT t 1 Ft 1 Tt 1

b1 slope of the line

X time period (i.e., X 1, 2, 3, , n)

Y a b X b X b X b X

Tracking signal

RSFE

MAD

(forecast error)

MAD

13

Annual ordering cost Number of orders placed per year

Q

Average inventory level =

2

(Ordering cost per order)

Annual Demand

D

Co Co

Number of units in each order

Q

Annual holding cost Average Inventory

Economic Order Quantity

Annual ordering cost = Annual holding cost

(Carrying cost per unit per year)

D

Q

Co C h

Order quantity

2

2

2DCo

Q

EOQ Q *

Ch

Ch

2

Total cost (TC) = Order cost + Holding cost

Cost of storing one unit of inventory for one year = Ch =

D

Q

IC, where C is the unit price or cost of an inventory item

TC Co Ch

and I is Annual inventory holding charge as a percentage

Q

2

of unit price or cost

2DCo

Q*

IC

ROP without Safety Stock:

EOQ without instantaneous receipt assumption

Reorder Point (ROP) = Demand per day x Lead

Maximum inventory level (Total produced during the

time for a new order in days

production run) (Total used during the production run)

dL

(Daily production rate)(Number of days production)

Inventory position = Inventory on hand +

(Daily demand)(Number of days production)

Inventory on order

(pt) (dt)

Q

Q

d

pt dt p d Q 1

p

p

p

Total produced Q pt

Q

d

1

2

p

D

Annual setup cost Cs

Q

Average inventory

instantaneous receipt assumption

Annual holding cost Annual setup cost

Q

d

D

1 Ch Cs

2

p

Q

Q*

2DCs

d

Ch 1

p

Safety Stock

Q

d

1 Ch

2

p

D

Annual ordering cost Co

Q

D = the annual demand in units

Q number of pieces per order, or production run

Quantity Discount Model

2DCo

EOQ

IC

If EOQ < Minimum for discount, adjust the quantity to Q

= Minimum for discount

Total cost Material cost + Ordering cost + Holding cost

D

Q

Total cost DC + Co + Ch

Q

2

Holding cost per unit is based on cost, so Ch = IC

Where I = holding cost as a percentage of the unit cost

(C)

Safety Stock with Normal Distribution

Annual holding cost

14

Stock

Service level = 1 Probability of a stockout

Probability of a stockout = 1 Service level

ROP d L Z d L

Z

= number of standard deviations for a given

service level

dLT = standard deviation of demand during the lead

time

Safety stock = ZdLT

Demand is constant but lead time is variable

ROP dL Z d L

d standard deviation of daily demand

L standard deviation of lead time

Both demand and lead time are variable

d daily demand

Total Annual Holding Cost with Safety Stock

Total Annual Holding Cost = Holding cost of regular

inventory + Holding cost of safety stock

Q

THC Ch (SS)Ch

2

ROP d L Z L d2 d 2 L2

The expected marginal loss = (1 P)(ML)

The optimal decision rule

Stock the additional unit if P(MP) (1 P)ML

P(MP) ML P(ML)

P(MP) + P(ML) ML

P(MP + ML) ML

ML

P

ML + MP

15

PROJECT MANAGEMENT

t=

a + 4m + b

6

Earliest finish time = Earliest start time + Expected

activity time

EF = ES + t

Latest start time = Latest finish time Expected

activity time

LS = LF t

Slack = LS ES, or Slack = LF EF

Project standard deviation T Project va riance

complete) x (Total activity budget)

Crash cost Normal Cost

Crash cost/Time Period

Normal time Crash time

b a

6

Earliest start = Largest of the earliest finish times of

immediate predecessors

ES = Largest EF of immediate predecessors

Latest finish time = Smallest of latest start times for

following activities

LF = Smallest LS of following activities

Project Variance = sum of variances of activities on the

critical path

Due date Expected date of completion

Z

Variance =

T

Activity difference = Actual cost Value of work

completed

16

Single-Channel Model, Poisson Arrivals,

Multichannel Model, Poisson Arrivals,

Exponential Service Times (M/M/1)

Exponential Service Times (M/M/m or M/M/s)

m = number of channels open

= mean number of arrivals per time period (arrival

= average arrival rate

rate)

= mean number of customers or units served per

= average service rate at each channel

time period (service rate)

The probability that there are zero customers in the

The average number of customers or units in the

system

system, L

1

P0

for m

n

m

n = m 1 1

1

m

L

n =0 n! m! m

The average number of customers or units in the

1

W

system

( / ) m

L

P

2 0

(m 1)!(m )

2

Lq

The average time a unit spends in the waiting line or

( )

being served, in the system

The average time a customer spends waiting in the

( / ) m

1 L

queue, Wq

W

P

2 0

(m 1)! (m )

Wq

The

average

number

of

customers

or units in line

( )

waiting for service

The utilization factor for the system, (rho), the

Lq L

probability the service facility is being used

in the system

P0 1

system is greater than k, Pn>k

k 1

Pn>k

n n

C=

=

P0=1

Pn=(1) n

Finite Population Model

(M/M/1 with Finite Source)

= mean arrival rate

= mean service rate

N = size of the population

Probability that the system is empty

waiting for service

1 L

Wq W q

The average number of customers or units in line

waiting for service (Utilization rate)

()

channel)

Total service cost = mCs

m = number of channels

Cs = service cost (labor cost) of each channel

Total waiting cost = (Total time spent waiting by all

arrivals) x (Cost of waiting)

= (Number of arrivals) x (Average wait per arrival)Cw

17

P0

= (W)Cw

1

n

n 0

Average length of the queue

Lq N

1 P0

Average number of customers (units) in the system

L Lq 1 P0

N

N!

(N n)!

(Wq)Cw

Total cost = Total service cost + Total waiting cost

Total cost = mCs + WCw

Total cost (based on time in queue) = mCs + WqCw

Lq

Wq

(N L)

Average time in the system

1

W Wq

n

N!

Pn

P for n 0,1,..., N

N n ! 0

Constant Service Time Model (M/D/1)

Average length of the queue

2

Lq

2 ( )

Average waiting time in the queue

Wq

2 ( )

Average number of customers in the system

L Lq

1

W Wq

L = W

(or W = L/)

L q = Wq

(or Wq = Lq/)

Average time in system = average time in queue +

average time receiving service

W = Wq + 1/

Pn(t) = Probability of exactly n customers in queuing system at time t, given number at time 0.

s = number of servers (parallel service channels) in queuing system

n= mean arrival rate (expected number of arrivals per unit time) of new customers when n customers are in

system

= expected interarrival time

n= mean service rate for overall system (expected number of customers completing service per unit time)

when n customers are in system. Represents combined rate at which all busy servers (those serving customers)

achieve service completions

= expected service time

Utilization factor = = /(s)

Steady-state condition

Pn= probability of exactly n customersin queuing system

18

n=0

n =s

W =E (waiting time system ( includes service time ) for each individual customer )

W q =E( waitingtimequeue ( excludes service time ) for each individual customer)

Littl e' s formula : L=W

Lq= W q

1

W =W q +

t

Exponential Distribtuio n' s probability density function , f T ( t )= e for t 0

0 for t< 0

t

t

Cumulative Probabilities : P { T t }=1e ; P {T >t }=e

Property 1 : f T (t ) isa strictly decreasing function of t ( t 0 ) ; so P {0 T t }> P {t T t+ t }

Property 2 : Lack of memory ; so P { T > t+ tT > t }=P { T > t }

Property 3 : Minimum of several independent exponential random variables

has an exponential distribution .

U=min {T 1 , T 2 , , T n }

P {U > T } =exp i t

i=1

= i

i=1

n t

( t) e

P { X ( t ) =n }=

, for n=0, 1,2, ; Also mean E { X ( t ) }=t ; where is mean rate

n!

X ( t )=number of occurrences by time t (t 0)

Property 5 : For all positive values of t , P { T t+ tT >t } t , for small t

BirthDeath Process

0

Cn = n1 n2

, for n=1,2,

n n1 1

For n=0, Cn=1

Pn=C n P0 , for n=0, 1, 2,

Pn =1

n=0

P0=

( )

Cn

n=0

rate

long run , = n Pn

the

n=0

T1, T2, be independent service-time random

variables having an exponential distribution with

parameter, and let

Sn+1 = T1 + T2 + + Tn+1, for n = 0, 1, 2,

Sn+1 represents the conditional waiting time given n

customers already in the system. Sn+1 is known to have

Average arrival

19

an Erlang distribution.

n=0

( 1 ) t

, for t 0

n=0

Cn =

n!

()

s

s ! s

()

ns

( )

P0=1/

for n=1,2, , s

=

s ! s ns

()

s1

( / )n ( / ) s

1

n ! + s ! 1/(s)

n=0

P

if 0 n s

n! 0

P n=

n

P0

if n s

s ! sn s

()

()

P0 ( /)s

Lq =

s !(1 )2

L

W q= q

1

W =W q +

L=Lq +

t (s1 )

P ( /)s 1e

P { E (W ) >t }=et 1 + 0

s ! (1 ) s1/

Wq

P{ E(W q)>t }=(1P {E ( 0 }) es (1 ) t

Wq

)]

s1

P{ E ( 0 }= Pn

n=0

Finite Queue: Number of customers in the system

cannot exceed a specified number, K.

Queue capacity is K-s

n = for n=0,1, 2, , K 1

0 for n K

M/M/1/K

n

( / ) = n for n=1, 2, , K

Cn =

0

for n> K

1

P0=

K +1

1

1 n

P n=

, for n=0, 1,2, , K

1 K +1

M/M/1 with finite population

N!

Cn = ( Nn ) !

0

()

P0=1/

n=0

for n N

for n> N

( )]

N!

( Nn ) !

N!

P0 ,if n=1, 2, , N

( Nn ) !

N

+

Lq= (n1) P0=N

(1P0 )

n =1

P n=

()

20

L=N (1P0 )

L

W=

L

W q= q

K +1

L=

( K +1)

1

1 K+1

Lq=L(1P 0)

L

W q= q

L

W=

= n Pn= ( NL)

n=0

= P = (1P )

n n

K

n=0

M/M/s/K

( /)n

n!

s

Cn = ( / ) ns ( /)n

=

s ! s

s ! s ns

0 for n> K

for n=1, 2, , s

( )

P0=1/

n=0

n s

K

n!

s ! n=s+1 s

( ) ()

P

n! 0

Pn=

n

P0

s ! sn s

0 for n> K

()

()

ns

( )

N!

( N n ) ! n !

()

C =

N!

(

)

( Nn ) ! s ! s

n

n s

0 for n> K

s1

for n=1, 2, , s

( )]

N!

n

( Nn ) ! n! + ( N nN) !!s ! s ns

n=0

n=s

()

N!

P

(

( Nn ) ! n ! )

P=

N!

(

)P

( N n ) ! s ! s

P0=1/

if 0 n s

ns

if s n N

0 if n> N

N

Lq= (ns) Pn

n=s

s1

s1

L= n Pn + Lq + s 1 Pn

n=0

s1

L= n Pn + Lq + s 1 Pn

n=0

for n=0,1, 2, , s

n=0

n=0

L

W q= q

1 K s(K s) K s

P ( /)s

Lq = 0

s !(1 )2

s1

W=

= P = ( NL)

n n

n=0

L

W q= q

L

W=

M/G/1 Model

P0=1

M/D/s Model

2

+

2(1)

For M / D/1model , Lq =

2

2(1)

L=+ Lq

L

W q= q

21

notice that Lq , L , W qW all increase

2

as is increased .

M/Ek/s Model

Erlang distributio n' s probability density function

( k )k k1 kt

f ( t )=

t e , for t 0

( k1 ) !

k are strictly positive

k must be aninteger

Excludinginteger restriction ,

Erlang is same as gamma

1

Mean=

1 1

Standard deviation=

k

T1, T2, , Tk are k independent random variables with

an identical exponential distribution whose mean is 1/

(k).

T = T1 + T2 + + Tk, has an Erlang distribution with

parameters and k. Exponential and degenerate

(constant) are special cases of Erlang distribution with

k=1 and k=respectively.

M/Ek/1 Model

2

2

2

2

/ (k )+ 1+k

Lq =

=

2(1)

2k ()

L=W

1+ k

W q=

2 k ( )

1

W =W q +

W =W q +

Jackson Networks

With m service facilities where facility i (i=1, 2, .,., m)

Steadystate expected weighting time

the system ( including service time ) for a

member of priority class k , W k

1

1

Wk=

+ , for k=1, 2, , N

A Bk1 Bk

s1

Where A=s !

B 0=1

s

rj

+s

r s j=0 j !

B k =1 i=1

s

s=number of servers

=meanservice rate per busy server

i=meanarrival rate for priority classi

N

= i

i=1

r=

i< s

i=1

Lk = k W k , for k =1,2, , N

A=s !

For single server , s=1

A= 2 /

With different exponential

k =mean service rate for priority class k ,

for k=1, 2, , N

ak

1

Wk=

+ , for k =1,2, , N

b k1 b k k

k

Where a k = i2

i=1 i

b0 =1

k

i

bk =1

i=1 i

k

i <1

i=1

i

Preemptive Priorities Model

1/

For s=1,W k =

, for k=1, 2, , N

B k1 B k

22

1. Infinite Queue

2. Customers arriving from outside the

system according to a Poisson input

process with parameters ai

3. si servers with an exponential servicetime distribution with parameter

Lk = k W k , for k =1,2, , N

(j= 1, 2, , m) with probability pij or departs the

system with probability

m

qi =1 pij

j=1

M/M/s queueing system with arrival rate

m

j=a j + i pij

i=1

where s j j > j

i= i

si i

23

MARKOV ANALYSIS

(i) =

vector of state probabilities for period Pij = conditional probability of being in state j in the

future given the current state of i

i

P11 P12 P1n

=

(1, 2, 3, , n)

P

where

P22 P2 n

21

P

n

=

number of states

1, 2, , n =

probability of being in state 1,

P

P

P

m

1

m

2

mn

state 2, , state n

For any period n we can compute the state

probabilities for period n + 1

(n + 1) = (n)P

Fundamental Matrix

F = (I B)1

Inverse of Matrix

a b

P

c d

P -1

a b

c d

r

c

b

r

a

r = ad bc

Partition of Matrix for absorbing states

I O

P

A B

I = identity matrix

O = a matrix with all 0s

Equilibrium condition

= P

M represent the amount of money that is in each of the

nonabsorbing states

M = (M1, M2, M3, , Mn)

n

= number of nonabsorbing states

M1

= amount in the first state or category

M2

= amount in the second state or category

Mn

= amount in the nth state or category

n

CI

n 1

Consistency Ratio

CI

CR

RI

Stochastic process {Xt} (t = 0, 1, ) is a Markov chain

if it has the Markovian property.

Markovian property if P{Xt+1 = j | X0 = k0, X1 = k1,

, Xt-1 = kt-1, Xt = i} = P{Xt+1=j|Xt=i}, for t=0,1,

and every sequence i, j, k0, k1, , kt-1.

Pij = P{Xt+1 = j | Xt = i}

n-step transition probabilities:

(n)

Pij =P{ X t +n= jX t=i }

(n )

Pij 0, for all i j ; n=0, 1, 2,

M

P(n)

ij =1 for all i ; n=0, 1,2,

j=0

State

0

(n)

P = 1

0 1 M

P(n)

00

P(n01) P(n)

0M

P(n)

P(n)

P(n)

11

1M

10

(n)

P M 0 P(n)

P(n)

M1

MM

ChapmanKolmogorov Equations

24

P(ijn )= P(ikm ) P(kjnm ) , for all i=0,1, , M ; j=0, 1, , M ; m=1, 2, ,n1 ; n=m+1, m+ 2,

k=0

(n)

(n)

(n)

Unconditional state probabilities: P { X n= j }=P { X 0 =0 } P0 j + P { X 0=1 } P1 j ++ P { X 0=M } PMj

(n)

lim p ij = j >0

n

1

lim p(k)

ij = j

n n k=1

M

i=0

j=1

j=0

1

lim E C (X t ) = j C( j)

n t=1

n

j =0

First Passage Time

(1)

f (1)

ij = pij = pij

(1)

f (2)

ij = pik f kj

k j

f ij = p ik f kj

(n)

(n1)

k j

f (n)ij 1

n=1

ij =

if f ij < 1

(n )

n=1

nf ij

n=1

(n )

if f ij =1

(n)

n=1

if f (n)

ij =1,then ij =1+ p ik kj

n=1

k j

Absorbing States

M

f ik = p ij f jk , for i=0,1, , M ,

j=0

f kk=1

f ik=0,if state iis recurrent i k

25

Upper control limit (UCL) x z x

UCL x x A2 R

Lower control limit (LCL) x z x

LCL x x A2 R

x = mean of the sample means

R = average of the samples

z = number of normal standard deviations (2 for

A2 = Mean factor

95.5% confidence, 3 for 99.7%)

x = mean of the sample means

x = standard deviation of the sampling distribution

x

of the sample means = n

UCL R D4 R

LCL R D3 R

UCLR = upper control chart limit for the range

LCLR = lower control chart limit for the range

D4 and D3 = Upper range and lower range

p-charts

UCL p p z p

LCL p p z p

p = mean proportion or fraction defective in the sample

Total number of records examined

z = number of standard deviations

p

c-charts

The mean is c and the standard deviation is equal to

c

p

is estimated by p

Estimated standard deviation of a binomial distribution

p (1 p )

p

n

where n is the size of each sample

Range of the sample = Xmax - Xmin

used for 99.7% and 2 is used for 95.5%)

UCL c c 3 c

LCL c c 3 c

Control Chart Model

k is the distance of control limits from the

center line, expressed in Standard Deviation

units. Common choice is k = 3.

UCL=W + k W

CL=W

LCL= W k W

W isthe mean of the sample W

W is the standard deviationof sample W

W =

n

X Control Chart

UCL=+3 / n

LCL=3 / n

CL=

Estimate of meanof the population , grand mean,

m

1

^= X = X i

m i=1

X isthe center line on X control chart

X control chart R

UCL=x + A2 r

CL=x

LCL=x A 2 r

26

R Control Chart

S Control Chart

m

1 Ri

Estimate of mean R is R=

m i=1

R

Estimate of , is ^ =

d2

Constant d 2 istabulated for various sample sizes

+ 3 R

UCL= X

d2 n

3

LCL= X

R

d2 n

3

A 2=

d 2 n

UCL=D 4 r

CL=r

LCL=D3 r

Where r isthe sample average range .

D3D4 are tabulated for various sample sizes

Moving Range Control Chart

m

1

MR=

|X X i1|

m1 i=2 i

MR

MR

Estimate of , is ^ =

=

d 2 1.128

CL, UCLLCL for control chart for individuals

mr

mr

UCL=x +3

=x +3

d2

1.128

CL=x

mr

mr

LCL=x 3

=x 3

d2

1.128

Control chart for moving ranges

UCL=D 4 mr=3.267

mr

CL=mr

LCL=D3 mr=0

as D3 is 0 for n=2.

m

m

= 1 Pi = 1 D i

P

m i=1

mn i=1

p (1 p )

UCL= p +3

n

CL= p

p (1 p )

LCL=p 3

n

Where p isthe observed value of average .

1

p

S

c4

Constant c 4 is tabulated for various sample sizes

s

UCL=s +3 1c 24

c4

CL=s

s

LCL=s 3 1c24

c4

Estimate of , is ^ =

X control chart S

s

UCL=x +3

c 4 n

CL=x

s

LCL=x 3

c4 n

USLLSL

6 ^

r

^ =

d2

Onesided PCR , is PCR k =min

USL LSL

,

3

3

LSL

)

USL

P ( X >USL ) =P (Z >

)

m

1 Ui

U=

m i=1

u

UCL=u + 3

n

CL=u

u

LCL=u 3

n

Where u isthe average number of defects per unit

CUSUM Chart

(Cumulative Control Chart )

27

distributed point falls outside the limits

when the process iscontrol

Exponentially Weighted Moving Average Control

Chart ( EWMA )

z t= x t + (1 ) z t1 for each time t

UCL=0 +3

[ 1(1)2 t ]

n 2

CL=0

LCL= 03

[ 1(1)2t ]

2

n

R

^ = ^ = S

^0= X

d2

c4

MR

For n=1, ^ 0= X ^ =

1.128

S H (i)=max [ 0, x i( 0+ K ) +s H (i1) ]

Lower onesided CUSUM for period i

S L (i)=max [ 0, ( 0K )x i +s L (i1) ]

Where starting values s H ( 0 )=s L ( 0 )=0

H is called decision interval

Reference value , K=

2

1=0 +

K=k ; H =h

s (i)

0 + K + H , if s H ( i ) > H

nH

^=

s (i)

0K L , if s L ( i )> H

nL

28

OTHERS

Computing lambda and the consistency index

The input to one stage is also the output from

another stage

n

CI

sn1 = Output from stage n

n 1

The transformation function

Consistency Ratio

tn = Transformation function at stage n

CI

CR

General formula to move from one stage to

RI

another using the transformation function

sn1 = tn (sn, dn)

The total return at any stage

fn = Total return at stage n

Transformation Functions

sn 1 an sn bn d n cn

Return Equations

rn an sn bn d n cn

Probability of breaking even

Fixed cost

Break - even point (units)

break - even point

Price/unit Variable cost/unit

Z

sv

P(loss) = P(demand < break-even)

Price Variable cost

EMV

(Mean demand)

P(profit) = P(demand > break-even)

unit

unit

Fixed costs

Using

the

unit normal loss integral, EOL can be

K(break

even

point

X)for

X

BEP

Opportunit y Loss

computed using

$0for X BEP

EOL = KN(D)

where

EOL = expected opportunity loss

K = loss per unit when sales are below the break-even

K = loss per unit when sales are below the breakpoint

even point

X = sales in units

= standard deviation of the distribution

N(D) = value for the unit normal loss integral for a

given value of D

break even point

D

a

AB b d

c

a b

c d

ad ae

e bd be C

cd ce

d

c e ad be cf

f

e f ae bg af bh

g h ce dg cf dh

a b

c d

Determinant Value = (a)(d) (c)(b)

a b c

d e f

g h i

Determinant Value = aei + bfg + cdh gec hfa

idb

Numerical value of numerator determinan t

X

Numerical value of denominato r determinan t

29

a b

Original matrix

c d

Determinan t value of original matrix ad cb

d c

Matrix of cofactors

b a

d b

c a

Equation for a line

Y = a + bX

where b is the slope of the line

Given any two points (X1, Y1) and (X2, Y2)

Change in Y Y Y2 Y1

b

Change in X X X 2 X 1

a b

c d

d

ad cb

c

ad cb

ad cb

a

ad cb

Y = X2 4X + 6

Find the slope using two points and this equation

Change in Y Y Y2 Y1

b

Change in X X X 2 X 1

Y1 aX 2 bX c

Y C

Y 0

Y2 a ( X X ) 2 b( X X ) c

Y Xn

Y nX n 1

Y Y2 Y1 b( X ) 2aX (X ) c(X ) 2

Y b(X ) 2aX (X ) c(X ) 2

X

X

X (b 2aX cX )

b 2aX cX

X

Y cX n

Y cnX n 1

1

Xn

Y g ( x ) h( x )

+ (Total purchase cost)

D

Q

TC C o + C h DC

Q

2

Q = order quantity

D = annual demand

Co = ordering cost per order

Ch = holding cost per unit per year

C = purchase (material) cost per unit

Name

Y g ( x ) h( x )

Economic Order Quantity

dTC DCo Ch

dQ

Q2

2

2DCo

Q

Ch

n

X n 1

Y g ( x ) h( x)

Y g ( x ) h( x)

d 2TC DCo

3

dQ 2

Q

When to Use

Approximations /

Probability M

Conditions

an

E(X) is Expected Value = Mean; Xi = random variables possible values; P(Xi) = Probability of each of the random

n

i 1

i 1

E X X i P X i Variance 2 [ X i E (X)] 2 P (X i )

Uniform

(Discrete)

Equal probability

Finite number of possible values

x

Cumulative F

For a range that starts from a and ends with b (

b

(b a)

2

2 Variance

(b a 1) 2 1

12

30

Binomial /

Bernoulli

(Discrete)

Bernoulli Trials:

Each trial is independent

Probability of success in a trial is

constant

Only two possible outcomes

Unknown: Number of successes

Known: Number of trials

Number of trials that result in a

success

> 5), approximate binomial

to normal. P(X x) = P(X

x+0.5)

P(x X) = P(x-0.5 X)

If n is large & p is small,

approximate to Poisson as

= np

Binomial expansion

Probability of r s

x = 0,1,,n

nC r C

Expected valu

Variance =

n r nr

p q

k 0 r

n

a b n

Geometric

(Discrete)

Number of trails until first success

Negative

Geometric

(Discrete)

Known: Number of success

Number of trials required to obtain r

successes

Hypergeom

etric

(Discrete)

Poisson

(Discrete)

Name

x = 1,2,,n

Expected value (mean) = E(X) = = 1/p

= (1 p)/p2

Poisson Process:

Probability of more than one event

in a subinterval is zero.

Probability of one event in a

subinterval is constant &

proportional to length of subinterval

Event in each subinterval is

independent

Number of events in the interval

E X

xf ( x)dx

Uniform

(Continuo

us)

f ( x) (1 p ) x 1 p

Without replacement

Number of success in the sample

When to Use

Equal probability

0

F ( x ) ( x a ) /( b a)

1

n!

p r q n r

r!(n r )!

x 1

1 p x r p r

r 1

f (x )

x = r,r+1,r+2,, 0

E(X) = = r/p

V(X) = V(X) of binomial *

((N-n)/(N-1)) where ((N-n)/

(N-1)) is called finite

population correction factor

n << N or (n/N) < 0.1,

hypergeometric is equal to

binomial.

Approximated to normal if

np > 5, n(1-p) > 5 and (n/N)

< 0.1

Arrival rate does not change

over time; Arrival pattern

does not follow regular

pattern; Arrival of disjoint

time intervals are

independent.

Approximated to normal if

>5

Z X

= Variance =

f (x )

x =max(0,n-N+k

K objects classed

objects classified

of n objects

E(X) =

f ( x) P( X x )

P(X) = probabilit

occurrences

Expected

Taylor

Approximations / Conditions

Probability

a

P(x1 X x2) = P(x1 X x2) = P(x1 X x2) = P(x1 X x2)

( x ) f ( x )dx

2

xa

axb

bx

f (u )du

; for

For a range that starts from a and ends with b (a, a+1, a+2

( a b)

(b a ) 2

Variance V ( X )

12

2

31

Normal

(Continuo

us)

Notation: N(,)

X is any random variable

Cumulative (z) = P(Z < z); Z

is standard normal

is approximated to normal.

x 0.5 np

P ( X x) P( X x 0.5) P Z

np(1 p )

x 0.5 np

P ( x X ) P ( x 05 X ) P

Z

np (1 p )

continuity correction.

Normal is approximated to Poisson if > 5

X

Z

f(

- < x

E(X

Standard norm

variance =

P ( X x) P

Cumulative

normal

- < < +

Exponenti

al

(Continuo

us)

Memoryless

P ( X t1 t 2 | X t1 ) P ( X t 2 )

distance between

successive events of Poisson

process with mean > 0

length until first count in a

Poisson process

f (x ) e

P ( X x ) 1 F ( x ) e x

P ( X x ) F ( x ) 1 e x

1

Expected value = = Average ser

P ( a X b ) F (b ) F ( a )

is less than or equal to time t is given by the formula, P (X

Erlang

(Continuo

us)

r shape

scale

Time between events are

independent

length until r counts in a

Poisson process or

exponential distribution

Variance =

r

2

f (x )

r x r 1 e x

for x 0 an

(r 1)!

P(X>0.1) = 1 F(0.1)

If r = 1, Erlang random variable is an exponential random v

Gamma

(Continuo

us)

gamma is Erlang

Erlang random variable is

time until the rth event in a

Poisson process and time

between events are

independent

For = , r = , 1, 3/2, 2,

gamma is chi-square

Gamma Function

f (x)

r 1 x

x e

(r )

r

Mean r

(r ) x r 1 e x dx, for r 0

0

Variance 2 r 2

32

Weibull

(Continuo

us)

- Scale; - Shape

Time until failure of many

different physical systems

=2, Weibull is identical to Raleigh

f (x )

Cumu

E( X )

2

Lognorma

l

(Continuo

us)

X = exp(W); W is normally

distributed with mean and

variance

ln(X) = W; X is lognormal

Easier to understand than

Weibull

ln( x)

F ( x ) P X x P exp(W ) x P W ln( x ) P Z

F ( X ) 0, for x 0

f (x )

(ln x ) 2

exp

for 0 x

2 2

x 2

E ( X ) e

Beta

(Continuo

us)

finite range

E( X )

Power

Law

(Continuo

us)

Central

Limit

Theorem

Called as heavy-tailed

distribution.

f(x) decreases rapidly with x

but not as rapid as

exponential distribution.

V ( X ) e 2 e 1

( ) 1

f (x)

x (1 x ) 1 for 0 x 1,

( )( )

V (X )

said to obey the power law distribution if its density

( 1) x

f (x)

xmin xmin

If X1, X2, , Xn is a random sample of size n taken from a population (either finite or infin

variance 2, and if X is the sample mean, the limiting form of the distri

X

/ n

33

Name

Two or more

Discrete

Random

Variables

f X (x ) P( X x)

y

f XY ( x, y )

f Y (y ) P (Y y ) f XY ( x, y )

f

x

E Y | x y f Y |x ( y)

V (Y | x) ( y Y | x ) 2 f Y | x ( y )

f XY ( x, y ) f X ( x) f Y ( y )

f Y ( y ); f XY ( x, y ) f X ( x) f Y ( y

f X ( x)

f X ( x)

f X 1 X 2 X p ( x1 , x 2 , , x p ) P ( X 1 x1 , X 2 x 2 , , X p x p )

Independence f Y | x ( y )

Joint Probability Mass Fn:

for all po

of X1,X2,,Xp

Joint Probability Mass For subset:

f X 1 X 2 X k ( x1 , x 2 , , x k ) P ( X 1 x1 , X 2 x 2 , , X k x k ) P ( X 1 x1 , X 2 x 2 , , X k x k )

X1,X2,,Xp for which X1=x1, X2=x2,, Xk=xk

Marginal Probability Mass Function:

f X i ( x i ) P( X i x i ) f X 1 X 2 X p ( x1

E ( X i ) x i f X 1 X 2 X p ( x1 , x 2 , , x p )

Multinomial

Probability

Distribution

Two or more

Continuous

Random

Variables

V ( X i ) xi X i

Mean:

Variance:

The random experiment that generates the probability distribution consists of a s

However, the results from each trial can be categorized into one of k classes.

P( X 1 x1 , X 2 x 2 , , X k x k )

n!

p1x1 p 2x2 p kxk

x1 ! x 2 ! x k !

E X i np i

f Y |x (y )

for x1 x 2 x k n and p1

V ( X i ) np i (1 p i )

f X (x ) f XY ( x, y ) dy

f Y (y )

f XY ( x, y )

V (Y | x) ( y

for f X ( x) 0 E Y | x y f Y | x ( y ) dy

f X ( x)

y

y

f Y | x ( y ) f Y ( y ); f X | y ( x ) f X ( x) f XY ( x, y ) f X ( x) f Y ( y ) fo

Independence:

P ( X 1 x1 , X 2 x 2 , , X p x p ) B f X 1 X 2 X p ( x1 ,

B

( x , x , , x ) f

( x , x , , x )dx1 d

k

X1 X 2 X p

1

2

p

Joint Probability Mass For subset: X 1 X 2 X k 1 2

range of X1,X2,,Xp for which X1=x1, X2=x2,, Xk=xk

f X i ( xi ) f X 1 X 2 X p ( x1 , x 2 , , x p ) dx1 dx 2 dxi 1

R

Marginal Probability Density Function:

is over all points of X1,X2,,Xp for which Xi=xi

Mean:

E ( X i ) x i f X 1 X 2 X p ( x1 , x 2 , , x p ) dx1 dx 2 dx p

V ( X i ) xi X i

Varia

f X 1 X 2 X p ( x1 , x 2 , , x p ) dx1 dx 2 dx p

Covariance is a measure of linear relationship between the random variables. If the relationship betwe

nonlinear, the covariance might not be sensitive to the relationship.

Two random variables with nonzero correlation are said to be correlated. Similar to covariance, the cor

linear relationship between random variables.

Covariance: XY E[( X X )(Y Y )] E ( XY ) X Y

XY

Correlation:

cov( X , Y )

V ( X )V (Y )

34

Bivariate

Normal

1 ( x x ) 2 2 ( x X )(

f XY ( x, y; X , Y , X , Y , )

exp

XY

X2

2(1 2 )

2 X Y 1 2

for - < x < and - < y < , with parameters x > 0, y > 0, - < X < , - <

1

y;X,Y,X,Y, ), the marginal probability distribution of X and Y are normal with me

deviation x and y, respectively.

Conditional Distribution: If X and Y have a bivariate normal distribution with joint p

y;X,Y,X,Y, ), the conditional probability distribution of Y given X = x is

Y |x Y X

Linear

Functions of

random

variables

Y Y

X

X X

and variance

y;X,Y,X,Y, ), the correlation between X and Y is

If X and Y have a bivariate normal distribution with = 0, X and Y are

Given random variables X1, X2, , Xp and constants c1,c2, , cp, Y = c1X1 + c2X2+ + c

X1, X2, , Xp

Mean E(Y) = c1E(X1) + c2E(X2) + + cpE(Xp)

Variance:

i j

Mean and variance on average:

E ( X ) ;

E (Y ) c1 1 c 2 2 c p p ;

General

Functions of

random

variables

2 Y | X Y2 1

V (Y ) c V ( X 1 ) c 22V ( X 2 )

2

1

V (X ) 2 p

with E ( X i )

V (Y ) c12 12 c 22 22 c 2p

35

Confidence Interval

Sample Size

x is an estimator of ; S 2 is sample variance

Error: Rejecting the null Hypothesis H 0 when it is true; Type II Error: Failing to reject null hypothesis H 0 when it is

Probability of Type I Error = = P(type I error) = Significance level = -error = -level = size of the test.

Probability of Type II Error = = (type II error)

= Probability of rejecting the null hypothesis H 0 when the alternative hypothesis is true = 1 - = Probability of co

rejecting a false null hypothesis.

P-value = Smallest level of significance that would lead to the rejection of the null hypothesis H 0.

100 (1 ) CI on is

100 (1 ) upper confident that the error 100(1-)% upper confidence bound for

xz /2 / n x+ z/ 2 / n

z /2 isthe upper 100 /2

percentage point of standard

normal distribution

when sample

Z /2 2

n=

E

xz / n=l

Large scale sample size n: Using central limit theorem, X has approximately a normal distribution with me

variance /n.

xz /2

S/ n

Z0

X 0

/ n

Test Statistic:

Alternative

p-value

hypothesis

Probability above |z0|

H1: 0

& below -|z0|,

P = 2[1 - (|z0|)]

Probability above z0

H1: 0

P = 1 - (z0)

Probability below z0

H1: 0

P = (z0)

S

S

x+ z / 2

n

n

= z /2

Rejection

Criteria

n=

2 2

( z /2 + z )

where =0

n=

z 0> z

z 0<z

) (

n

n

z / 2

2 2

( z + z )

where =0

for .

Parameter for Operating Characteristic Cu

d=

| 0| ||

t distribution (Similar to normal in symmetry and unimodal. But t distribution is heavier tails than normal) w

degrees of freedom. k = n-1

X

S/ n

f ( x )=

[( k +1) /2]

1

.

2

k (k /2) [ ( x /k ) +1 ](k+1)/ 2

100 (1 ) CI on is

using trial and error as s is

xt /2,n 1 s / n x+t / 2,n1 s/ n

percentage point of t distribution

with n degrees of freedom

collected.

Mean = 0

u=x+ t ,n1 s / n

100(1-)% lower confidence bound for

xt , n1 s/ n=l

Probability of Type II Error for a two-sided

36

When the true value of mean = + , the di

X 0

T0

S/ n

Test Statistic:

Alternative

hypothesis

H1: 0

H1: 0

H1: 0

p-value

degrees of freedom and noncentrality para

n/ . If = 0, the noncentral t distribution

the usual central t distribution. T '0 denot

noncentral t random variable.

Rejection Criteria

Probability above

|t0| & below -|t0|

Probability above

t0

Probability below

t0

t 0> t ,n 1

t 0<t ,n1

d=

| 0| ||

=

(n 1) S 2

2

f ( x )=

k /2

1

(k /2)1 x /2

x

e

(k /2)

100 (1 ) CI on 2 is

(n1) s 2 2 ( n1)s 2

2

2 / 2,n1

1 / 2,n1

Mean = k

upper and lower 100/2 percentage points of chi-square

Null hypothesis:

Test Statistic:

Alternative hypothesis

H 1 :

(n1)s

2

2

,n1

H0 : 2 02

02

(n 1) S 2

02

Rejection Criteria

2

0

2

0

(n1)s2

21 ,n1

Variance = 2k

H 1 :

2 02

20 > 2 , n1

H 1 :

2 02

20 < 2 ,n1

d=

| 0| ||

X np

np (1 p )

p p

p (1 p )

n

37

100 (1 ) CI on proportion p is

Z 2

n= /2 p (1 p)

^p ( 1p )

^p (1p) E

^pz

p ^p + z /2

n

np can be computed as

2

percentage point of standard

normal distribution

( )

^p from a

preliminary sample or use the

maximum value of p, which is 0.5.

H1: p p0

p-value

^p ( 1p )

p

n

p0 p+ z /2 p0 (1 p0 )/n

p (1 p)/n

) (

p0 p

n=

]

]

z /2 p0 (1 p0)+ z p(1 p)

pp 0

z p (1 p0 )+ z p( 1 p)

n= 0

p p0

z 0> z

z 0<z

100 (1) CI on 12 is

the errorestimating

12 by

z/ 2

21 22

x 1x 2

12 x 1x 2 + zx/2

/

+

x

1

2

n1 n2

21 22

will

not

exceed a specific amount E

+

n1 n2

when sample

z /2 isthe upper 100 /2

Z /2 2 2 2

n=

( 1 + 2 )

percentage point of standard

E

normal distribution

Rejection Criteria

Probability above

|z0| & below -|z0|,

P = 2[1 - (|z0|)]

Probability above

z0

P = 1 - (z0)

Probability below

z0

P = (z0)

^p ( 1p )

n

X np0

np0 (1 p0 )

Test Statistic:

H0 : p p0

z0

H1: p p0

p ^p + z

^pz

Null hypothesis:

Alternative

hypothesis

H1:p p0

12 x 1x 2 + z

( )

21 22

+

n1 n2

x 1x 2z

21 22

+

n1 n 2 1 2

X 1 X 2 1 2

12 22

n1 n2

= z /2

21 22

+

n1 n2

)(

z /2

21+ 22

n= 2

Sample size for a two-sided test, with n 1n2,

1 /n1+ 22 /n2

2

2

2

( z /2 + z ) ( 1 + 2 )

n=

Sample size for a two-sided test, with n1n2,

2

( 0 )

2

21 22

+

n1 n 2

( z + z ) ( 1 + 2 )

n=

2

( 0 )

38

d=

|1 2 0| | 0|

Z0

+

2

1

2

2

X 1 X 2 0

12 22

n1 n2

Test Statistic:

Alternative

p-value

hypothesis

Probability above

H1: 0

|z0| & below -|z0|,

P = 2[1 - (|z0|)]

Probability above

H1: 0

z0

P = 1 - (z0)

Probability below

H1: 0

z0

P = (z0)

1 1

1 1

x 1x 2t /2, n +n 2 S p

+ 12 x 1x 2 +t /2, n +n 2 S p

+

n1 n2

n1 n2

t /2, n +n 2 is theupper /2

percentage point of t distribution

with n1+ n22 degrees of freedom

21 + 22

Rejection

Criteria

z 0> z

z 0<z

x 1x 2t /2,

s 21 s22

+ x x + t

n1 n2 1 2 1 2 /2,

X 1 X 2 1 2

1 1

n1 n2

2

p

2

2

p

S =

( n1 1 ) S 21+ ( n21 ) S 22

n1+ n22

, is:

H1: 0

T0

Test Statistic:

X 1 X 2 0

1 1

Sp

n1 n2

Alternative

hypothesis

H1: 0

H1: 0

H1: 0

p-value

Rejection Criteria

Probability above

t 0> t /2,n +n 2 t 0 <t / 2,n +n 2

|t0| & below -|t0|

Probability above

t 0> t ,n +n 2

t0

Probability below

t 0<t ,n + n 2

t0

If variances are not assumed equal

1

39

T0*

If H0:= 0 is true, the statistic

S12 S 22

n1 n2

2 2

2

2

1

S S

+

n1 n2

( S21 / n1 ) ( S22 / n2 )

n11

X 1 X 2 0

n 21

(Oi Ei )

Ei

i 1

Where Oi is the observed frequency and Ei is the expected frequency in the ith class.

Approximated to Chi-square distribution with k-p-1 degrees of freedom. p represents the number of parameters. If test statistic

r

1 c

1 c

1 r

ui Oij v j Oij

Eij nui v j Oij Oij

n j 1

n j 1 i 1

n i 1

Expected Frequency of each cell

k

X 02

.

(Oij Eij ) 2

0

Eij

i 1 j 1

For large n, the statistic

P-value is

100 (1) predictioninterval on a single future observation a normal distribution is

1

1

xt /2,n 1 s 1+ X n+1 x+ t /2,n1 s 1+

n

n

Prediction interval for Xn+1 will always be longer than the CI for because there is more variability associated

Tolerance interval for capturing at least of the valuesa normal distribution with cofidence level 100 ( 1) is

xks , x + ks

X i ~0

Number of positive

differences = r+ If P-value is less than some preselected level , we will reje

z0

~ ~

H

:

H : ~ ~0

0

Null hypothesis: 0

One-sided hypothesis: 0

H1 : ~ ~0

H1 : ~ ~0

P R r when p

2

P-value:

P R r when p

2

P-value:

R 0.5n

0.5 n

H

Two-sided hypothesis: 0

H1 : ~ ~0

If r+ < n/2, P-value

2 P R r when p

2 P R r when p

H0 : 0

0

Sort based on i

differences; Give the ranks the signs of th

corresponding differences.

Sum of Positive Ranks: W+; Absolute value of Sum of Negative Ranks: W-. W = min(W+,W-)

Null hypothesis:

H1 : 0

w w*

40

H1 : 0

w w*

H1 : 0

w w*

W n(n 1) / 4

n(n 1)( 2n 1) / 24

z0

Arrange all n1 and n2 observations in ascending order of magnitude and assign ranks to them. If two or m

observations are tied(identical), use the mean of the ranks that would have assigned if the observations diffe

sum of ranks in smaller sample. W2 is sum of ranks in other sample.

W 2=

( n1 +n 2 )( n1+ n2 +1 )

2

W 1

Normal approximation when n1 and n2 > 8,

Z0=

W 1w

w

dt

S D / n D d +t

SD/ n

t

2

2

, n1

,n1

, n1

Null hypothesis: H0:D= 0

T0

Test Statistic:

D 0

S D / n where

and SD is the sample standard deviation of these differences.

Alternative

p-value

Rejection Criteria

hypothesis

Probability above

t 0> t /2,n1t 0 <t /2, n1

H1:D 0

|t0| & below -|t0|

Probability above

t 0> t ,n 1

H1:D 0

t0

Probability below

t 0<t ,n1

H1:D 0

t0

Let W and Y be independent chi-square random variables with u and v degrees of freedom respective

Ratio

F=

W /u

Y /v

f ( x )=

Mean

u +v

u

v

u/ 2

u

(

)1

x2

( )( )

u

v u

( ) ( ) ( ) x +1

]

2

2 [ v

for >2

2

(u +v)/2

Variance

F Distribution

F=

S21 / 21

S22 / 22

2 (u+ 2)

, for > 4

2

u ( 2 ) (4)

1

f 1 , u , =

f , ,u

2=

, 0< x <

Null hypothesis:

H 0 : 21= 22

41

F0 =

Test Statistic:

Alternative

hypothesis

2

2

H1: 1 2

2

H1: 1

S21

S22

Rejection Criteria

f 0> f

,n11,n21

f 0 <f

1 ,n11,n21

2

f 0> f , n 1, n 1

22

f 0< f 1 ,n 1,n 1

H1: 1 2

P-value is the area (probability) under the F distribution with n 1-1 and n2-1 degrees of freedom that lies bey

computed value of the test statistic f0.

2

21

is

22

s 21

21 s12

f

f

s 22 1 2 ,n 1,n 1 22 s 22 2 ,n 1,n 1

f

f

are theupper lower /2 percentage point of F distribution withn21 numerator n11 denominator

2

, n21, n11

1 ,n21,n11

2

H 0 : p1 =p 2

H 1 : p1 p2

^

^ 2 ( p1 p2 )

P 1 P

Null hypothesis:

Z=

+

n1

n2

^

^

P1 P

2

Z0=

Test Statistic:

1 1

^

P ( 1 ^

P)

+

n1 n2

Alternative

hypothesis

H1:p1 p2

p-value

Fixed-Level tests

P = 2[1 - (|z0|)]

Probability above z0

P = 1 - (z0)

Probability below z0

P = (z0)

Probability of Type II Error for a two-sided test

H1: p1 p2

H1: p1 p2

] [

z 0> z

z 0<z

z /2 pq

( 1 /n 1+1 /n 2 )( p 1 p2)

z /2 pq

( 1/n1+ 1/n2 )( p 1 p2)

P1P2

P1P2

n1 p 1+ n2 p2

n1 (1 p1 )+ n2 (1 p2 )

Where p=

and q =

n1+ n2

n 1+ n2

[ z /2 ( p 1+ p 2)(q 1+ q2 )/2+ z p 1 q 1+ p2 q 2 ]

n=

(p 1 p2 )2

100 (1 ) CI on the differencethe true proportions p1 p2 is

where q1 = 1 p1 and q2 = 1 p2

42

^p 1 ( 1^p 1 ) ^p2 ( 1^p2 )

+

p1 p2 ^p1 ^p2 + z /2

+

n1

n2

n1

n2

z /2 isthe upper /2 percentage point of standard normal distribution

^p1 ^p2z /2

Inferences:

1. Population is normal: Sign test or t-test.

a. t-test has the smallest value of for a significance level , thus t-test is superior

to other tests.

2. Population is symmetric but not normal (but with finite mean):

a. t-test will have the smaller (or a higher power) than sign test.

b. Wilcoxon Signed-rank test is comparable to t-test.

3. Distribution with heavier tails:

a. Wilcoxon Signed-rank test is better than t-test as t-test depends on the sample

mean, which is unstable in heavy-tailed distributions.

4. Distribution is not close to normal:

a. Wilcoxon Signed-rank test is preferred.

5. Paired observations:

a. Both sign test and Wilcoxon Signed-rank test can be applied. In sign test, median

of the differences is equal to zero in null hypothesis. In Wilcoxon Signed-rank test,

mean of the differences is equal to zero in null hypothesis.

6.

43

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