NMIMS Global Access School for Continuing Education (NGA-SCE)

Course: Business Statistics

Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________

1. The Stock Price details of TATA TELESERVICES (MAHARASHTRA) LTD. are given below

For the above sample, determine the following measures:

a. The mean closing price
b. The standard deviation of total number of shares
c. The median value of number of trades
d. The 75th percentile value of total turnover
Analyze the above data using descriptive statistics and comment on the relationship between
the various variables

a. The mean closing price

Date Close

1-Mar-19 3.09
5-Mar-19 3.35
6-Mar-19 3.41
7-Mar-19 3.55
8-Mar-19 3.49
11-Mar-19 3.5
12-Mar-19 3.52
13-Mar-19 3.46
14-Mar-19 3.4
Σxi 30.77
N 9
µ 3.419

Total Number of entries = 9

Sum of all the closing Prices (entries) = 30.77

Mean closing price = Sum of all closing price recorded / Total Number of entries

Mean closing price = 30.77/9 = 3.419

P a g e 1 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________

b. The standard deviation of total number of shares

To find the Standard Deviation, we need to calculate Variance. Variance is the average of the
squared deviations about the arithmetic mean for a set of number.

Standard Deviation is Square root of the Variance.

Date No fo Shares (xi)

Mean (µ) xi-µ (xi-µ)2
1-Mar-19 69,242 171,965 (102,723) 10,551,923,419.86
5-Mar-19 197,344 171,965 25,379 644,116,200.31
6-Mar-19 158,205 171,965 (13,760) 189,325,369.09
7-Mar-19 400,183 171,965 228,218 52,083,658,384.64
8-Mar-19 273,890 171,965 101,925 10,388,796,225.20
11-Mar-19 146,178 171,965 (25,787) 664,946,447.42
12-Mar-19 80,672 171,965 (91,293) 8,334,330,699.86
13-Mar-19 149,428 171,965 (22,537) 507,896,336.31
14-Mar-19 72,539 171,965 (99,426) 9,885,441,097.53
Σxi 1,547,681 Σ(xi-µ)2 93,250,434,180.22
N 9
µ 171,965

Standard Deviation = σ = √ (Variance) = √(( Σ(xi-µ)2)/N) = √(93,250,434,180.22/9)

Standard deviation of total number of shares = σ = 101,789.78

c. The median value of number of trades

The median is the middle value in an ordered array of numbers. To calculate the median of the given
data
First the data need to be rearranged into ascending or descending order.

Date Nos of Trades

1-Mar-19 100
12-Mar-19 109
13-Mar-19 116
11-Mar-19 145
6-Mar-19 160
14-Mar-19 183
5-Mar-19 251
7-Mar-19 433
8-Mar-19 503

Secondly, find the middle entry.

P a g e 2 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
Total Number of entries = 9, hence middle entry is 5th entry.

Hence Median is 160

d. The 75th percentile value of total turnover

Percentile are measure of central tendency that divide a group of data into 100 parts.

Steps in determining location of 75th percentile

1) Organize the numbers into ascending order

Date Total Turnover

S.No
1 1-Mar-19 214,257
2 14-Mar-19 244,876
3 12-Mar-19 283,868
4 11-Mar-19 512,714
5 13-Mar-19 514,536
6 6-Mar-19 547,942
7 5-Mar-19 651,621
8 8-Mar-19 942,944
9 7-Mar-19 1,399,537

2) Calculate the percentile location:

Percentile location (i) = Percentile of Interest (P)x Number of dataset (N) / 100

Percentile location (i) = 75 x 9/100 = 6.75

3) Determine the location:

Since percentile location calculated in step 2 is not a whole number hence location will be 7th
entry.

4) 75th percentile value of total turnover is 651,621

Analysis of data using descriptive statistics:

Mean or arithmetic average is a measure of central tendency of a set of data. In descriptive

statistics, there are two types of averages: the first are the mathematical averages and the second
are the positional average. The arithmetic mean is the most widely used measure for central
tendency; it can be obtained by adding all the items of the series and dividing this total by the
number of items.

In above data, we can see that all the data of closing prices have a central tendency around 3.419
Mean is affected by all change or addition in every data entry.

P a g e 3 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
Standard Deviation is a popular measure of variability of the dataset. Standard deviation of total
number of shares is 101,789.78

While Mean of total number of shares entries is 15,47,681.

Now from Empirical rule, distribution of data approximately around the bell curve is indicated with
relation between mean and standard deviation in following form.

In the given data, distribution of entries of number of shares is stated below:

68% of entries lies between 1,445,891.22 & 1,649,470.78

95% of entries lies between 1,344,101.44 & 1,751,260.56
99.7% of entries lies between 1,242,311.66 & 1,853,050.34

Median:
Other method of measuring the central tendency is by calculating the median of a dataset. The
Median is the middle value of the ordered array of the data set. Unlike Mean, Median is unaffected
by the magnitude of extreme values. One of the disadvantage of Median is that not all the
information from the data set is used. We have noted that Median of dataset of “no of Trades” is
160. Median may not change if there is slight change on data entries other than 5th entry.

Percentiles are the measure of central tendency that divides a group of data into 100 Parts. Nth
percentile is the value such that at least “n” percent of data are below the value. In the given dataset
it is noted that 75th percentile data is 651,621. This means that at least 75% of data is smaller than
651,621 and no more than 25% data is more than 651,621

P a g e 4 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
2. Explain Let’s assume that you have gathered the following information on the prices for different
management books and the number of pages that each book contains.

Book Pages (x) Price (y)

A 500 700
B 700 750
C 750 900
D 590 650
E 540 750
F 650 700
G 480 450

a. Develop a least-squares estimated regression line.

Equation of Simple regression line is represented by following formula:

Ŷ = b0 + b1 x

b0 = Sample Y intercept
b1 = Slope of the regression line
To develop a Least-squares estimated regression, we need to determine the slope of the line as per
following relation:

b1 = (Σxy – (Σx)(Σy)/n)/ ((Σx2 – (Σx)2/n))

First Let us determine the value of Σx, Σy, Σx2 and Σxy

Book Pages (x) Price (y) x2 xy

A 500 700 250000 350000
B 700 750 490000 525000
C 750 900 562500 675000
D 590 650 348100 383500
E 540 750 291600 405000
F 650 700 422500 455000
G 480 450 230400 216000
Σ 4210 4900 2595100 3009500
Mean (x') 601.429 700

Using these Values, we can determine slope (b1)

slope (b1) = (3009500-(4210 x 4900/7))/(2595100-(4210x4210/7)) = 0.991

Now Y intercept of a Regression line is

P a g e 5 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
b0 = y’ – b1 x’
y’ – Mean of Y
x’ – Mean of X

Using these Values, we can solve for sample y-intercept (b0)

sample y-intercept (b0) = 700 – (0.991*601.43) = 104.155

Hence The least-squared regression line for this problem is

Ŷ = 104.155 + 0.991 x

b. Compute the coefficient of determination and explain its meaning.

Using the above determined least squared regression line, we can calculate predicted price (Ŷ) for
each entry of pages (x). and Hence Residual, i.e Error (Y-Ŷ).

Below table presents the predicted value, residual and square of error based on above determined
regression line.

Predicted Residual
Book Pages (x) Price (y) y2 (Y-Ŷ)2
Value (Ŷ) (Y-Ŷ)
A 500 700 490000 599.655 100.345 10069.1
B 700 750 562500 797.855 -47.855 2290.1
C 750 900 810000 847.405 52.595 2766.2
D 590 650 422500 688.845 -38.845 1508.9
E 540 750 562500 639.295 110.705 12255.6
F 650 700 490000 748.305 -48.305 2333.4
G 480 450 202500 579.835 -129.835 16857.1
Σ 4210 4900 3540000 -1.195 48080.5

Sum of square of errors SSE = 48080.5

Coefficient of determination is evaluated as r2 = 1- SSE/SSyy = 1- SSE/((Σy2 – (Σy)2/n))

r2 = 1- 48080.5/(3540000-(4900*4900/7)) = 1-48080.5/(110000) = 0.563

P a g e 6 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
This means that 56.3% of the variability of the price of books is explained by variation in number of
pages. The result also means that 43.7% of the variability in price of the books is unexplained by
regression model.

P a g e 7 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________

3. The OECD cut forecasts again for the global economy in 2019 and 2020, following on from previous
downgrades in November, as it warned that trade disputes and uncertainty over Brexit would hit
world commerce and businesses. The Organization for Economic Co- Operation & Development
forecast in its interim outlook report that the world economy would grow 3.3 percent in 2019 and
3.4 percent in 2020.

Those forecasts represented cuts of 0.2 percentage points for 2019 and 0.1 percentage points for
2020, compared to the OECD’s last set of forecasts in November. “High policy uncertainty, ongoing
trade tensions, and a further erosion of business and consumer confidence are all contributing to
the slowdown,” said the OECD in its report. “Substantial policy uncertainty remains in Europe,
including over Brexit. A disorderly exit would raise the costs for European economies
substantially,” added the OECD.

Europe remains impacted by uncertainty over Britain’s plans to exit the European Union, the U.S. -
China trade spat and other weak spots, such as signs of a recession in Italy. For Germany, Europe’s
largest economy, the OECD more than halved its 2019 GDP growth forecast to 0.7 percent from 1.6
percent previously. It predicted a light recovery to 1.1 percent growth in 2020. Germany’s export-
reliant economy is particularly affected by weaker global demand and rising trade barriers.
(Source: https://www.reuters.com/article/us-oecd-economy/global-economic-growthforecasts-
cut-again-by-oecd-idUSKCN1QN13N)

A) In your opinion what forecasting tools are used in the above case for forecasting the global
economy? Justify.

INTRODUCTION

It is observed that forecasts are typically produced either from economic theory-based models or
from time series models. A time series model can provide a reasonable benchmark to evaluate the
forecast value to the pure explanatory power of the past behavior of the variable, recently
sophisticated time series models could provide more serious benchmarks for economic models.
Forecasting is most effective over the short term, rather than the long term.

There are many statistical techniques available for time series forecast such as:

• Simple Moving Average (SMA)

• Weighted moving Averages (WMA)
• Exponential Smoothing (SES)
• Autoregressive Integration Moving Average (ARIMA)

In my opinion, Exponential smoothing must have been used for forecasting because GDP forecast
figures measured above is for Annual growth and hence no seasonality in the data.

CONCEPT AND APPLICATION

Exponential Smoothing assigns exponentially decreasing weights as the observation get older and
hence more weight is given to more recent values. Exponential smoothing is usually a way of
“smoothing” out the data by removing much of the “noise” (random effect) from the data by giving

P a g e 8 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
a better forecast. If a time series that can be described using an additive model with constant level
and no seasonality, we can use simple exponential smoothing to make short-term forecasts.

The simplest form of exponential smoothing is given by the formula:

Ft+1 = α. Xt + (1-α). Ft
Where Value of α is determined by the forecaster. Value of α can lie between 0 and 1.

This procedure implies that the new forecast will be a combination of present forecast and present
actual value. Lesser the Value of α means that forecasted value is more aligned towards present
forecasted Value while, more the value of α will generate a forecast more aligned toward present
actual Value.

To Explain further, let us access last 10 years nominal GDP data of Germany (Ref. OECD website).

α = 0.1 α = 0.5 α = 0.8

Year GDP Forecast Error Forecast Error Forecast Error
2009 -5.56
2010 3.94 -0.56 4.50 -2.78 6.72 -4.45 8.39
2011 3.72 -0.11 3.83 1.69 2.03 3.04 0.68
2012 0.69 0.28 0.41 1.81 -1.12 2.95 -2.26
2013 0.6 0.32 0.28 0.48 0.12 0.61 -0.01
2014 2.18 0.35 1.83 0.46 1.72 0.54 1.64
2015 1.48 0.53 0.95 1.26 0.22 1.81 -0.33
2016 2.16 0.62 1.54 1.00 1.16 1.29 0.87
2017 2.46 0.78 1.68 1.39 1.07 1.85 0.61
2018 1.45 0.95 0.50 1.62 -0.17 2.12 -0.67
2019 1.00 1.20 1.35

Here forecasted value of Year 2019 is calculated considering value of α as 0.1, 0.5 and 0.8. We can
see that Forecasted GDP growth of Germany is forecasted by OECD is 0.7, while Our calculations
show a min GDP growth of 1. This shows that OECD has considered other socio-political factors such
as Brexit uncertainty, US-China Trade spat etc, while forecasting the final GDP forecast.

CONCLUSION:

Since annual GDP growth prediction is free from Seasonality (Variations that occurs less than 1 year),
exponential smoothing can work with considerable accuracy. Above calculation is an example of
Simple exponential smoothing, to gain better forecasts, double exponential smoothing (Holt-Winters
double exponential smoothing) or Triple exponential smoothing can be utilized.
It should be noted that in real world, Forecasting is done while considering other social-economic
factors prevailing at the time of forecasts.

P a g e 9 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________
B) Are the forecasts accurate? Comment. What all errors are possible in the forecasts and how to
deal with such errors?

INTRODUCTION

All statistical forecasting techniques use past data to infer or forecast future performance. It is well
noted fact that past data doesn’t assure future performance. In real world various socio-economic
factors can affect future economic outlook. Assuming no impact from external socio-economic
factors, statistical forecast can predict future outcomes with fare accuracy to plan for future.
However, there can be a gap between forecasted and actual figures. In statistics, the accuracy of
forecast is the degree of closeness of the statement of quantity to that quantity’s actual (true) value.
The actual value usually cannot be measured at the time the forecast is made because the statement
concerns the future.

CONCEPT AND APPLICATION

There are many ways of measuring the accuracy of forecasts, one way is to compare forecast values
with actual values and determine the amount of farecasting error a technique produces.
Examination of error for each dataset can be tedious process, hence it is preferred to have a single
measure of the error for full dataset.
Various ways to measure forecasting errors are:

Mean Absolute Deviation (MAD): This is simple the mean or average value of all the absolute value
of errors produced by Forecasting technique. Since errors can be positive or negative, MAD
overcasts this problem by considering the absolute value of error and thereby analyzing the
magnitude of the error disregarding its direction.

MAD = Σ(IeiI)/n
Absolute
Year Actual Forecast error error
2009 1.5
2010 1 0.15 0.85 0.85
2011 -0.6 0.24 -0.84 0.84
2012 0.69 0.15 0.54 0.54
2013 0.6 0.21 0.39 0.39
2014 0.01 0.24 -0.23 0.23
2015 1.48 0.22 1.26 1.26
2016 2.16 0.35 1.81 1.81
2017 -1.46 0.53 -1.99 1.99
2018 1.45 0.33 1.12 1.12
Σ 9.03
MAD 1.004

Mean Square Error (MSE): Other way of cancelling the effect of positive and negative forecasterrors
is by Squaring the errors. Hence Calculating the mean of square of these errors will provide Mean
Square Error for the dataset.

P a g e 10 | 11
 NMIMS Global Access School for Continuing Education (NGA-SCE)
Course: Business Statistics
Internal Assignment Applicable for June 2019 Examination (Sem 2)
_____________________________________________________________________

MAD = Σei2/n
Considering the same data:
Year Actual Forecast error Square error
2009 1.5
2010 1 0.15 0.85 0.723
2011 -0.6 0.24 -0.84 0.697
2012 0.69 0.15 0.54 0.290
2013 0.6 0.21 0.39 0.156
2014 0.01 0.24 -0.23 0.055
2015 1.48 0.22 1.26 1.584
2016 2.16 0.35 1.81 3.286
2017 -1.46 0.53 -1.99 3.954
2018 1.45 0.33 1.12 1.255
Σ 12.00
MSE 1.333

There are many other methods to measure the accuracy of forecasts available. The most widely used
metrics are:

• MAPE (mean absolute percentage error)

• sMAPE (symmetric mean absolute percentage error)
• Pinball loss (a generalization of the MAE for quantile forecasts)
• CRPS (a generalization of the MAE for probabilistic forecasts)

CONCLUSION:

In statistics, there is no forecast 100% accurate, hence there is always a degree of error associated
with any forecast. It is very important to consider a metric of an error in a forecast. Selection of a
method for computation of error is up to a forecaster or analyzer. It is important to understand that
different technique will result in different information

P a g e 11 | 11