Measures of location or Measures of Central Tendency :

1) Mean or the average mean or the arithmetic mean

2) Median
3) Mode
 Measures of Central Tendency:
The Mean

 The arithmetic mean (often just called the “mean”) is

the most common measure of central tendency

 For a sample of size n: The ith value

Pronounced x-bar
n

X i
X1  X 2    Xn
X i1

n n
Sample size Observed values
 Measures of Central Tendency:
The Mean

 The most common measure of central tendency

 Mean = sum of values divided by the number of values
 Affected by extreme values (outliers)
Example 1 Example 2
11, 12, 13, 14, 15 11, 12, 13, 14, 20

Mean = 13 Mean = 14

11  12  13  14  15 65 11  12  13  14  20 70
  13   14
5 5 5 5
 Measures of Central Tendency:
The Median

 In an ordered array, the median is the “middle”

number (50% above, 50% below)

11 12 13 14 15 11 12 13 14 20

Median = 13 Median = 13

 Less sensitive than the mean to extreme values

 Measures of Central Tendency:
The Mode
DCOVA
 Value that occurs most often
 Not affected by extreme values
 Used for either numerical or categorical (nominal)
data
 There may be no mode
 There may be several modes

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 0 1 2 3 4 5 6

Mode = 9 No Mode
 Measures of Central Tendency:
Review Example

House Prices:  Mean: ($3,000,000/5)

$2,000,000 = $600,000
$ 500,000
$ 300,000
 Median: middle value of ranked
$ 100,000 data
$ 100,000 = $300,000
Sum $ 3,000,000  Mode: most frequent value
= $100,000
Measures of Central Tendency:
Which Measure to Choose?

 The mean is generally used, unless extreme values

(outliers) exist.
 The median is often used, since the median is not
sensitive to extreme values. For example, median
home prices may be reported for a region; it is less
sensitive to outliers.
 Measures of Variation
Variation

Range Variance Standard Coefficient of

Deviation Variation

 Measures of variation give information

on the spread or variability or
dispersion of the data values.

Same center,
different variation
Measures of Variation:
The Range
DCOVA
 Simplest measure of variation
 Difference between the largest and the smallest values:

Range = Maximum value – Minimum value

 Measures of Variation:
Why The Range Can Be Misleading

 Sensitive to outliers
Example 1
1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,5

Range = 5 - 1 = 4
Example 2

1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,120

Range = 120 - 1 = 119

 Measures of Variation:
The Sample Variance
 Sample variance:
n

 (Xi  X)  x
2

x  n
2
2
OR
S 
2 i 1
S 
2
n -1 n -1
Where
X = arithmetic mean
Note that n = sample size
Example
 From the following data
10 12 14 15 17 18 18 24

Find the variance and the standard deviation

Solution :

Mean = (10+12+14+15+17+18+18+24)/8=16
solution
16
X

10 -6 36

12 -4 16

14 -2 4

15 -1 1

17 1 1

18 2 4

18 2 4

24 8 64

Total zero 130

 Variance
n

 i
(X  X ) 2
130
S 
2 i 1
  18.57
n -1 8 1

Standard deviation
Another solution
X2
X
Variance
 x
2
10 100  x2 
n
S 2
 
12 144 n -1
14 196 2178 
128
2

8 
15 225 8 1
17 289 130
 18.57
7
18 324
18 324 Standard deviation
24 576
Total 2178
Measures of Variation:
Comparing Standard Deviations
DCOVA

Smaller standard deviation

Larger standard deviation

Measures of Variation:
Summary Characteristics
 The more the data are spread out, the greater the
range, variance, and standard deviation.

 The more the data are concentrated, the smaller the

range, variance, and standard deviation.

 If the values are all the same (no variation), all

these measures will be zero.

 None of these measures are ever negative.

Measures of Variation:
The Coefficient of Variation
DCOVA
 Measures relative variation
 Always in percentage (%)
 Shows variation relative to mean
 Can be used to compare the variability of two or
more sets of data measured in different units

 S
CV     100%

X 
 Measures of Variation:
Comparing Coefficients of Variation
DCOVA
 Stock A:
 Average price last year = $50

 Standard deviation = $5

S $5
CVA     100%   100%  10%
X $50 Both stocks have
the same
 Stock B: standard
 Average price last year = $100 deviation, but
stock B is less
 Standard deviation = $5 variable relative
to its price
S $5
CVB     100%   100%  5%
X $100
 Lecture 4
Example
 From the following data:
3, 4, 7, 6, 3, 5, 7,8,9, 48
Find:
1) The mean and the median
2) The mode
3) Is there any significant difference between the mean and the median? If yea
please state the reason
4) Find the range
5) Find the variance and the standard deviation.
6) Find the coefficient of variation.
Solution
 Mean:
Find the Median:

 Step 1: Sorting the data

3, 3, 4, 5, 6, 7, 7, 8, 9, 48
 Step 2: Determine the location of the median the median
lies between
Location of the median= (n+1)/2 the fifth and
sixth
= (10+1)/2=5.5 observation

 Step 3: Calculate the median

Median=(6+7)/2=6.5
2) Find the Mode?

 The mode is the most repeated value on the dataset

Answer: The mode is 3 and 7
3) Is there any significant difference between the mean and
the median? If yea please state the reason

 Yes there is a significant difference between the

mean and the median
 This is because there is an extreme value of the
dataset, and the mean is influence by the outliers.
 In this case, the median is more accurate than the
mean; because the median is not affected by the
extreme values (outliers)
4) Find the range?

 Range = Maximum- Minimum

Range= 48-3=45

Note that: The

range is affected
by the extreme
values
 5) Find the variance and the standard deviation.
10
X n
3
4
-7
-6
49
36
 (X i  X) 2

7 -3 9 S2  i 1

6 -4 16
n -1
3 -7 49 1642
  182.44
10  1
5 -5 25
7 -3 9
8 -2 4
S  S 2  182.44  13.50
9 -1 1
n
48 38 1444
 (X
i 1
i  X) 2
Tota zero 1642
6) Find the coefficient of variation?

 S 
CV   X 
  100%
 
13.5
 .100  135%
10