Case Study

The case study talks about the time when there was a financial crisis in subprime lending

and it became difficult for people with good credit history to obtain mortgages. As a result of the

subprime lending crisis, the prices of the houses dropped. The researchers have collected data for

two different time periods; January and July.

Descriptive statistics of the data have been calculated for 2 different time periods at the 95%

confidence interval. The tables below shows the descriptive statistics for the period of January

and July.

January  
   
Mean 231.08
Standard Error 22.74
Median 205
Mode 220
Standard Deviation 113.70
12926.0
Sample Variance 8
Kurtosis 4.41
Skewness 1.89
Range 510
Minimum 100
Maximum 610
Sum 5777
Count 25
Confidence Level (95.0%) 46.93
July  
   
Mean 182.72
Standard Error 13.88
Median 180
Mode 210
Standard Deviation 69.38
Sample Variance 4813.88
Kurtosis 2.70
Skewness 1.18
 Range 314
Minimum 86
Maximum 400
Sum 4568
Count 25
Confidence Level (95.0%) 28.64

Descriptive statistics basically calculates the mean, median, mode, standard deviation,

variance, range and other measures of data to examine the trend. Mean is the average value of

the data while mode is the most occurring value. Median is the central number of the data. Mean

tells about the distribution of the data.

As per the tables above, there is a visible decrease in the mean of both the periods. The

mean in January was 231.08 and in July it dropped to 182.72. The median also changed from 205

in January to 180 in July. The mode is 220 in January and 210 in July.

The purpose of standard deviation is to indicate how close the data points are to the

mean. For example, if the standard deviation is high, this would mean that data points are spread

out over a large value range. The standard deviation for the period of January is 113.70 which is

higher than the standard deviation in July which is 69.38. In January the prices of the houses

were spread over a large range of values whereas in July it was not the same.

To calculate the coefficient of variation in each period, we use the following formula:

Coefficient of Variation = Standard Deviation / Mean

For January, coefficient of variation = 113.70/231.08 = 0.49

For July, coefficient of variation = 69.38/182.72 = 0.38

Coefficient of Variation is essentially the ratio of standard deviation to mean. The higher the

value of coefficient of variation, the greater the level of spread/dispersion around the mean. The

lower the value, the estimate is more precise. The coefficient of variation is lower for July which

means that the estimate of home prices in this period is precise.

Over the 6 month period, the housing market in Fort Myers has changed in terms of the precision

of home prices. In July, the prices of the houses were more precise. The spread of the data

reduced with respect to the standard deviation. Therefore, the subprime lending crisis have

shown its effect over the six month-period.