Quantitative Techniques - II

Pritha Guha

October 23, 2019

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About the course

Text Book: Bowerman B., O’Connell R., Murphy E., Business

Statistics in Practice, 8th ed., McGraw Hill Education (India)
Exam Date: 21th November

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What have we done so far and why?

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There are so many questions...

How can you evaluate the evidence of global warming?

Does Aspirin reduce the chance of heart attack?
Are astrology predictions better than mere guessing?
How confident am I about getting an A+ in this course?

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...how to answer those

Every statistical study is motivated by a question (like one of the

above) that directly relates to reality.
To answer that question satisfactorily, we have to design a suitable
study that produces data (or information).
Statistical techniques are then applied to make sense of the data and
the conclusions are drawn (by using those statistical methods on the
dataset) are the answers to the questions we started off with.

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Population, Sample and related concepts

Population and Parameter

Population: All members of a relevant group
Parameter: A number associated with the population

Sample and Statistic

Sample:A subset of the population.
Statistic: Calculated from sample and used to make inferences about
the population.

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A good representation

Suppose we are interested to know about the performance of MBA

students of India in their 12th grade exam...
...and as a representative of all the students doing MBA in India, I choose
the first year BM students of XLRI.

Do you think this would be a good representation of the population?

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Choosing a sample!

Random Sampling
Before the sample is drawn, it has to be possible to calculate the
probability with which each member of the population will be
included in the sample.
This probability does not have to be the same for all members of the
population!

Simple Random Sampling (SRS)

Systematic Sampling
Cluster Sampling
Stratified Sampling

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Choosing a sample: Random Sampling

Simple Random Sampling

Each particular sample of size n has equal chance of getting selected
Two types of Simple Random Sampling:
1 Simple Random Sampling With Replacement(SRSWR)
2 Simple Random Sampling Without Replacement(SRSWOR)

R Code:
sample(1:50, 5, replace=TRUE)
sample(1:50, 5, replace=FALSE)

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Choosing a sample: Random Sampling

Systematic Sampling
Population elements are an ordered sequence
N
Population Size: N, Sample Size: n, choose k = n.
The first sample element is selected randomly from the first k
population elements
Thereafter, sample elements are selected at a constant interval, k,
from the ordered sequence frame.

Example:

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Choosing a sample: Random Sampling

Cluster Sampling
Population is divided into non-overlapping clusters or areas
Each cluster is a miniature version of the population
A subset of the clusters is selected randomly for the sample

Example:

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Choosing a sample: Random Sampling

Stratified Sampling
Population is divided into strata which are distinct and mutually
exclusive sub sets of the populations.
Each stratum is homogeneous within itself and heterogeneous with
other strata.
Sample is selected from each strata.
It ensures representation of individuals or items across the total
population.

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Choosing a sample: Random Sampling

Let N =Population size,

n =Sample size,
Nh = Size of stratum h
nh = Sample size from stratum h,
σh = sd of stratum h
What should be the size of the sample to be chosen from each strata?
Nh
Proportional Allocation: nh = n × N .
Neyman Allocation:
Nh σh
nh = n × PH .
h=1 N h σ h

Example of Stratified Random Sampling?

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Choosing a sample:Non Random Sampling

Convenience Sampling
Non-probability sampling procedure, involving no restrictions.
The investigators have the freedom to choose whomsoever they find
conveniently as their sample.
Convenient and relatively cheaper to undertake
Does not ensure precision due to lack of control mechanisms.
Useful when study being undertaken is exploratory in nature.

Judgement Sampling
Sample elements are selected by the judgement of the researcher
The elements, chosen according to some criterion, are such that as a
group they will adequately represent the parent population.

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Choosing a sample:Non Random Sampling

Quota Sampling
Population is divided into subclasses (similar to a strata)
Sample elements are selected from the subclasses until the quota
requirements are satisfied
Less expensive, fast data collection method, preparatory work is
minimal

Snowball Sampling
Survey subjects are selected based on referral from other survey
respondents

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Example:Home Work

Suppose 10,000 payment vouchers are generated in 2017 in XLRI. An

auditor checks the vouchers by drawing a probability sample(known as
audit sample).
(a) Why simple random sampling may not be appropriate?
(b) Which sampling design would you prefer?

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Example

We would like to have an idea about the average income of students

graduating from XLRI!
Parameter
Statistic
Most commonly used statistics are
Sample Mean (X̄ )
Sample proportion (p̂)
Sample Variance (s 2 )
For the inferential procedure to be good, the sample statistic should be
pretty close to the unknown population parameter. To ensure that, we
look at the sampling distributions of sample statistics.

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Some proprieties of the sample statistic

Sampling Distribution
The probability distribution of a sample statistic is called its sampling
distribution.
Note that
It is impossible to collect every possible sample and calculate the
sample statistic for each.
In fact, we only collect one sample.
The sampling distribution will tell us how much a statistic would vary
from sample to sample and will help us to predict how close a statistic
falls to the parameter it estimates.

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Example

Suppose that in a University there are three eateries, say A, B and C,

where all the students eat their lunch.
60% of the students go to eatery A, 20% of the students go to eatery B
and 20% of the students go to eatery C for lunch everyday.
Assume that each student chooses the eatery independently.
The cost for having lunch at eateries A, B and C are Rs.100, Rs.140 and
Rs.150 respectively.
(a) Suppose you have picked up 1 student as your sample. Obtain the
distribution of the student’s average expenditure on lunch on a
particular day.

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Example continued

(b) Suppose you have picked up 2 student as your sample. Obtain the
distribution of the students’ average expenditure on lunch on a
particular day.

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Sampling Distribution of the Sample Mean

(c) What will be the distribution of the average expenditure on lunch on a

particular day if you have n students as your sample?
To answer part (c) we have to deal with a huge number of different
combinations of choice of eateries, each having a different probability
→ Look at the sampling distributions.

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Looking at simulations for distribution of X̄

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