Week 1

IE 212 STATISTICS
Week 3: Measures of Variability

Dr. Başak GEVER

UNIVERSITY OF TURKISH AERONAUTICAL ASSOCIATION
IE 212 STATISTICS WEEK 1

MEASURES OF VARIABILITY
❖ The mean alone does not provide a complete or sufficient
description of data. In this section we present descriptive
numbers that measure the variability or spread of the
observations from the mean. In particular, we include the

1) Sample variance and standard deviation

2) Mean absolute deviation
3) Quartiles
4) Skewness
5) Kurtosis
6) Coefficient of variation

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1) Sample Variance and Standard Deviation

❖ The sample variance, 𝑠 2 , is the sum of the squared differences
between each observation and the sample mean divided by the
sample size, n, minus 1:
𝑛
1
𝑠2 = ∑(𝑥𝑖 − 𝑥̅ )2
𝑛−1
𝑖=1

➢ Here 𝑥̅ is arithmetic mean of the sample. The sample standard

deviation, s, is as follows:

𝑛
1
𝑠= √𝑠 2 =√ ∑(𝑥𝑖 − 𝑥̅ )2
𝑛−1
𝑖=1

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Example: Calculate the standard deviation of daily sales for Gilotti

Pizzeria, Location 1. From the following table the daily sales for
Location 1 are:
6; 8; 10; 12; 14; 9; 11; 7; 13; 11

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Shortcut Formulas for Sample Variance, 𝒔𝟐 :

➢ Sample variance, 𝑠 2 , can be computed as follows:

∑ 𝑛 2 (∑ 𝑛 )2 /𝑛
𝑖=1 𝑥𝑖 − 𝑖=1 𝑥𝑖
𝑠2 =
𝑛−1
➢ Alternatively, sample variance, 𝑠 2 , can be computed as
follows:

∑ 𝑛 2 ( ̅ ) 2
𝑥
𝑖=1 𝑖 − 𝑛 𝑋
𝑠2 =
𝑛−1

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Example: Use alternative formula to calculate the sample

variance for Gilotti’s Pizzeria Sales (Variance)

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Example: The following data give the time in months from hire to
promotion to manager for a random sample of 25 software
engineers from all software engineers employed by a large
telecommunications firm.

Calculate the variance and standard deviation for this sample.

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Solution:
𝑿𝒊 ̅ (𝑿𝒊 − 𝑿
𝑿𝒊 − 𝑿 ̅ )𝟐 25 -58,28 3396,5584
5 -78,28 6127,7584 23 -60,28 3633,6784
7 -76,28 5818,6384 24 -59,28 3514,1184
229 145,72 21234,3184 34 -49,28 2428,5184
453 369,72 136692,878 37 -46,28 2141,8384
12 -71,28 5080,8384 34 -49,28 2428,5184
14 -69,28 4799,7184 49 -34,28 1175,1184
18 -65,28 4261,4784 64 -19,28 371,7184
14 -69,28 4799,7184 47 -36,28 1316,2384
14 -69,28 4799,7184 67 -16,28 265,0384
483 399,72 159776,078 69 -14,28 203,9184
22 -61,28 3755,2384 192 108,72 11820,0384
21 -62,28 3878,7984 125 41,72 1740,5584
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 𝑛
1 5 + 7 + 229 + ⋯ + 125 2082
𝑋̅ = ∑ 𝑋𝑖 = = = 83.28
𝑛 25 25
𝑖=1
𝑛

∑(𝑋𝑖 − 𝑋̅)2 = 395461.04;

𝑖=1
𝑛
1
𝑠2 = ∑(𝑋𝑖 − 𝑋̅)2 = 16477.5433; 𝑠 = 128.3649
𝑛−1
𝑖=1
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Sample Variance for Grouped Data

❖ Suppose that you have two sets of sample data: 𝑋⃗1 and 𝑋⃗2

with the sizes of 𝑛 and 𝑚, respectively. Let us denote their

variances with 𝑠12 and 𝑠22 , respectively. Then the joint variance

(𝑠𝑝2 ) can be calculated as follows:

( ) 2 ( ) 2
𝑛 − 1 𝑠1 + 𝑚 − 1 𝑠2
𝑠𝑝2 =
𝑛+𝑚−2

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2) Mean Absolute Deviation (MAD):

Suppose you have a set of data 𝑋⃗ = (𝑥1 , 𝑥2 , 𝑥3 , … , 𝑥𝑛 ). Then, the
mean absolute deviation can be calculated as follows:
𝑛
1
𝑀𝐴𝐷 = ∑|𝑥𝑖 − 𝑥̅ |
𝑛
𝑖=1

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Example. Harry Vernon has collected data on the number of

VCRs sold last year for Vernon’s Music Store.

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3) Quartiles
❖ The lower quartile (Q1) is the middle number (median) of the
half of the data below the median, and the upper quartile is the
middle number (median) of the half of the data above the
median. We will denote

𝑄1 : lower quartile

𝑄2 : M = middle quartile (median)

𝑄3 : upper quartile

❖ The difference between the quartiles is called interquartile

range (IQR): 𝐼𝑄𝑅 = 𝑄3 − 𝑄1
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Solution.

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Box – and - Wisker Plot:

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4) Skewness: In nearly all situations, we would compute

skewness with a statistical software package or Excel.
❖ If skewness is zero or close to zero, then the distribution is
symmetric or approximately symmetric.
❖ A negative skewness value tells us that the distribution is
skewed to the left.
❖ Similarly, a positive skewness value tells us that the
distribution is skewed to the right.
1
∑𝑛𝑖=1(𝑋𝑖 − 𝑋̅)3
𝑆𝑘𝑒𝑤𝑛𝑒𝑠𝑠 = 𝛾3 = 𝑛 − 1
𝑠3

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❖ The important part of this expression is the numerator; the

denominator serves the purpose of standardization, making
units of measurement irrelevant.
❖ Positive skewness results if a distribution is skewed to the
right, since average cubed discrepancies about the mean are
positive.
❖ Skewness is negative for distributions skewed to the left and 0
for distributions such as the bell-shaped distribution that is
mounded and symmetric about its mean.
1) If 𝛾3 > 0, then data have “positive skewness”.
2) If 𝛾3 < 0, then data have “negative skewness”.
3) If 𝛾3 = 0, then data have “symmetric”.

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Remarks:

1. Arithmetic Mean < Median < Mode: Then, the frequency

curve of unimodal distribution has left skewness.

2. Mode < Median < Arithmetic Mean: Then, frequency curve

of unimodal distribution has right skewness.

3. Arithmetic Mean = Median = Mode: In this case, frequency

curve is symmetric.

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5) Kurtosis: Kurtosis is a measure of whether the distribution is

peaked or flat relative to a normal distribution. Kurtosis is based
on the size of a distribution’s tails.
1
∑𝑛𝑖=1(𝑋𝑖 − 𝑋̅)4
𝐾𝑢𝑟𝑡𝑜𝑠𝑖𝑠 = 𝛾4 = 𝑛 − 1 4
−3
𝑠

1) If 𝛾4 > 0, then data have “positive kurtosis”.

2) If 𝛾4 < 0, then data have “negative kurtosis”.
3) If 𝛾4 = 0, then data have “symmetric”.

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➢ Positive kurtosis indicates too few observations in the tails,

whereas negative kurtosis indicates too many observations in
the tail of the distribution.

➢ Distributions with relatively large tails are called leptokurtic

(negative kurtosis), and those with small tails are called
platokurtic. A distribution which has the same kurtosis as a
normal distribution is known as mesokurtic. It is known that the
kurtosis for a standard normal distribution 𝛾4 = 3.

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6) Coefficient of Variation: The coefficient of variation, CV, is a

measure of relative dispersion that expresses the standard
deviation as a percentage of the mean (provided the mean is
positive). The sample coefficient of variation (CV) is
𝑠
𝐶𝑉 = × 100%, 𝑋̅ > 0
𝑋̅

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