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Name: Sonia Khondakar

Roll Number: 31405020035
Stream: BBA
Year: 3rd
Semester: 5th

CA 2

Subject: Data Analytics Skills for Managers

Subject Code: BBA 504(A)
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TECHNICAL REPORT WRITING

APPLICATION OF DISPERSION

By Sonia Khondakar

28 Aug 2022,
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Content:

1. Abstract Page: 4
2. Introduction Page: 5
3. Measures of Dispersion Page: 6
4. Types of Measures of Dispersion Page: 7-9
5. Applications of Dispersion Page: 10
6. Scope of Dispersion’s Applications Page: 11
7. Conclusion Page:12
8. References Page:13
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Abstract:
While measures of central tendency are used to estimate “normal” values of a dataset,
measures of dispersion are important for describing the spread of the data, or its variation
around a central value. Two distinct samples may have the same mean or median, but
completely different levels of variability, or vice versa. A proper description of a set of data
should include both of these characteristics. In this report, we are going to learn about
various methods that can be used to measure the dispersion of a dataset, each with its own set
of advantages and disadvantages.
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Introduction:

The word dispersion is a statistical phrase that refers to the size of the
distribution of values that is predicted for a certain variable and is defined as
follows: Dispersion may be computed and assessed using a variety of statistics,
such as range, variance, and standard deviation, amongst other things. There are
several domains in which the word dispersion is used, including finance,
economics, business analysis, and forecasting, to name a few. The major use of
this is to make predictions for various reasons.

In layman’s terms, the dispersion may be defined as the range of possible

outcomes of investments based on the volatility of returns in the past period. For
your convenience, we may state that the larger the dispersion, the greater the
risk connected with the particular investment, and the smaller the dispersion, the
lower the risk associated with the particular investment. Let’s take a look at
measures of dispersion. In finance and investing, dispersion usually refers to the
range of possible returns on investment. It can also be used to measure the risk
inherent in a particular security or investment portfolio.
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Measures of Dispersion:

A measure of dispersion indicates the scattering of data. It explains the disparity of data
from one another, delivering a precise view of their distribution. The measure of dispersion
displays and gives us an idea about the variation and the central value of an individual item.
In other words, dispersion is the extent to which values in a distribution differ from the
average of the distribution. It gives us an idea about the extent to which individual items
vary from one another, and from the central value.
The variation can be measured in different numerical measures, namely:
(i) Range: It is the simplest method of measurement of dispersion and defines the
difference between the largest and the smallest item in a given distribution. If Y max and Y
min are the two ultimate items, then
Range = Y max – Y min

(ii) Quartile deviation: It is known as semi-interquartile range, i.e., half of the difference
between the upper quartile and lower quartile. The first quartile is derived as Q, the middle
digit Q1 connects the least number with the median of the data. The median of a data set is
the (Q2)second quartile. Lastly, the number connecting the largest number and the median
is the third quartile (Q3). Quartile deviation can be calculated by
Q = ½ × (Q3 – Q1)

(iii) Mean deviation: Mean deviation is the arithmetic mean (average) of

deviations ⎜D⎜of observations from a central value (mean or median).
Mean deviation can be evaluated by using the formula: A = 1⁄n [∑i|xi – A|]

(iv) Standard deviation: Standard deviation is the square root of the arithmetic average of
the square of the deviations measured from the mean. The standard deviation is given as,
σ = [(Σi (yi – ȳ) ⁄ n] ½ = [(Σ i yi 2 ⁄ n) – ȳ 2] ½
Apart from a numerical value, graphics methods are also applied for estimating dispersion.
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Types of Measures of Dispersion:

(1) Absolute measures:

• Absolute measures of dispersion are expressed in the unit of variable itself, like
kilograms, rupees, centimeters, marks.

(2) Relative measures:

• Relative measures of dispersion are obtained as ratios or percentages of the

average.
• These are also known as coefficients of dispersion.
• These are pure numbers or percentages that are totally independent of the units
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Absolute Measure of Dispersion:

(1) Range

• It is the simplest method of measurement of dispersion.

• It is defined as the difference between the largest and the smallest item in a given
distribution.
• Range = Largest item (L) – Smallest item (S)

(2) Interquartile Range

• It is defined as the difference between the Upper Quartile and Lower Quartile of a
given distribution.
Interquartile Range = Upper Quartile (Q3)–Lower Quartile(Q1)

(3) Quartile Deviation

• It is known as Semi-Inter-Quartile Range, i.e. half of the difference between the

upper quartile and lower quartile.
• Q.D = (Q3 - Q1)/2

(4) Mean Deviation

• Mean deviation is the arithmetic mean (average) of deviations ⎜D⎜of observations

from a central value {Mean or Median}.

(5) Standard Deviation

• Standard deviation is the Square Root of the Arithmetic Average of the squared of
the deviations measured from the mean.

(6) Lorenz Curve

• The Lorenz Curve is a graphic method of measuring estimated dispersion.

• This curve is often used to measure the inequalities of income or wealth in a society.
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Relatives Measure of Dispersion:

(1) Coefficient of Range

It refers to the ratio of the difference between two extreme items of the distribution to
their sum.
Coefficient of Range =
(L−S)/(L+S)

Where, L is the highest value of given data.

S is the smallest value of given data.

(2) Coefficient of Quartile Deviation

It refers to the ratio of the difference between Upper Quartile and Lower Quartile of a
distribution to their sum.
Coefficient of Quartile Deviation = (Q₃ – Q₁)/(Q₃ + Q₁)

Where, Q₁ is quartile first, Q₃ is quartile three.

(3) Coefficient of Mean Deviation

• Mean deviation is an absolute measure of dispersion.

• In order to transform it into a relative measure, it is divided by the particular
average, from which it has been calculated.
• It is then known as the Coefficient of Mean Deviation.
• Coefficient of Mean Deviation from Mean = MD/Mean
• Coefficient of Mean Deviation from Median = MD/Median

(4) Coefficient of Standard Deviation

• It is calculated by dividing the standard deviation (σ) by the mean (x̄ ) of the data.
• Coefficient of Standard Deviation = σ/X

(5) Coefficient of Variation

• It is used to compare two data with respect to stability (or uniformity or consistency
or homogeneity).
• It indicates the relationship between the standard deviation and the arithmetic
mean expressed in terms of percentage.
• Coefficient of Variation (C.V) = σ/X x 100, where C.V.=Coefficient of Variation,
σ=Standard Deviation, X=Arithmetic Mean
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Applications of Dispersion:
Here are some of the uses of dispersion:

• To use other Statistical Methods: After getting the value of dispersion we can
proceed to other techniques such as locating Co-relation or lines of Regression
(Regression Analysis).

• To Compare Variability: We are in the general habit of comparison, may it be

income, weight, height, or temperature. To achieve the required degree of result one
tries to compare the variability in the data.

• To test Reliability of Average: If the total of Differences between the central value
and given value is smaller, the uniformity is less i.e., it means that this sum should be
minimum for the reliability of the average.

• To establish trends in Time Series: In time series we remove, cyclical, seasonal, or

random fluctuations, which we form after studying central values.
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Scope of Dispersion’s Applications:

Even though the word dispersion may be used in a variety of contexts, it is most
usually associated with finance and investing. As we have previously stated,
one of the criteria that influence an investor’s decision on which policy to
purchase is the investment’s profile or profile of investments. Using dispersion,
it is possible to have a more complete understanding of the risks and volatility
associated with this profile. Alpha and beta, which quantify risk-adjusted
returns and returns adjusted to the benchmark index, respectively, may be used
to assess this dispersion in returns.

The dispersion may also be used in economics to describe how things are
distributed. It is customary to speak to price dispersion when discussing
dispersion in economics since it is a phrase that is well understood. This price
dispersion in economics refers to the variance in pricing between sellers of an
item that has the same features as the products offered by a seller, as defined by
the American Economic Association.
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Conclusion:
Dispersion in statistics refers to the measure of the variability of data or terms. It is a
statistical way of describing how the terms are spread out in different data sets. The more
sets of values, the more scattered data is found, and it is always directly proportional.
This range of values can vary from 5 - 10 values to 1000 - 10,000 values. This spread of
data is described by the range of descriptive range of statistics and is also an integral part
of mathematics and economics.
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References:
Beyer, W. H. CRC Standard Mathematical Tables, 31st ed. Boca Raton, FL: CRC Press, pp. 536
and 571, 2002.

Kotz, S.; et al., eds. (2006), Encyclopedia of Statistical Sciences, Wiley.

Levine, D. (2014). Even You Can Learn Statistics and Analytics: An Easy to Understand Guide
to Statistics and Analytics 3rd Edition. Pearson FT Press

Salkind, N. (2016). Statistics for People Who (Think They) Hate Statistics: Using Microsoft
Excel 4th Edition