sur sus ccuims oF uiuepenaent variable. Example 13.2: The following table gives indices of industrial production and number of registered unemployed people (in lakh). Calculate the value of the 1992 1993 1994 1995 1996 1997 1998 107 105 «11210899 correlation coefficient. 1991 12 12 1986 Year : Index of Production : 100 102 104 See ae 15 ered Number Unemployed : Solution: Calculations of Karl Pearson's correlation coefficient are shown in the table below:18 175 119 18s 19.20 195 20-21 205 have alues in the formula of Karl Peuson'scoreation coetha Substituting values 3.2819 ip moderately negative, eines correlation between ee 9 tnd nese Produit Henn mb & and aes OS ave tee BIE es the jcmttoton of items of production SNS Sorrelaion ct snd eet og ‘Ste-group, ‘16 teay NAB 18-15 eg 20-21 No. of items 2g me Nag EO ata Ne-ofdcteive tems: gg 72 "70 go gy SO UDA Un com 1999) yearn OUP ae be dented by ssi and number of deter acetble > Caltlatons fr nan ai ‘comelaion below: a a) foe Bm Booed onl 2 ie we 3 add, ayes) Pred -cay rg636. * Fos Fon 6x -106— S14 fsxi9—(aF Jono a8) 949 ee valy HeBatve,"Petncen A OF is negate, and is merely close € 1, Sati item Ne Me bine i % den, Conclude SPOUp) any (percent of defective items) is moderate and & Tees 1 hat when size te eases, the number of delective dae vera the number of ¥ The fatto Teported sei!NiNg data relate to age of employees an En, sick oye ick in 8 month Wee yk eee are Sick day, “7 82 35 40 gn 50,255 TOA Bg a eee 8 Caleta Lo te Karl Kart Pearson's coefficient of correlation and interpret it Clttion: [Kashuir Unie, BCom, 1997) o Calculation BE 4 sick days be rpresemed by varies «and. Fexpeciey Mons fr vale of cnclaton int are show bw - ‘Sick days: Bate as 5.4 44 4 76 256 1 48 S98 56 a a pa 2 ae 4 28 36 5 <6 bs 2 4 2 4 50 4 16 4 2 be 6 36 6 in 35 9 81 5 2 a7 in 121 7 s ao 6 sk oa a ee # Ex. 0 2 sand y= = 4 aon 210 Substituting values in the formula of Karl Pearson's correlation coecent we have (2) Eh) 10230 Edy, roxio /10xoF Tracy? nb - OF ti. = 0870 368 therefore age of employees and number ce value Ot oa sh degree. Hence we conclude that 3s terpretatin ine wed to a h or posite cree eM gon ack eave more oflen cat ng to the marks requency aecordin ine relationship Measure the degree of lowing table gives the ‘The following 17 Jence test.nea ee % Sap, —— mae eae ae ieee 5 ‘ 1 4 i: 7 3 ‘ 0 Pia ts tt : ee i see ae a. 1 y5a5? = 1-2. 1 - 04857 = 0.5148 1 0 The rh stow mee ot waiens a wo aan posing cmeon eee peromane Example 18.10: Jesks fel ths vo fm as 12 clerks The longsering leks fee ak G5) er ee Ne on ag free Hier ter eit ett kL aaaereeer tor rau, An me of in office. he shown ow eer Ranking aecording fem ee eae re Ranking according to effceny gekstopea tebe ise alors e rs li for seniority incement? (Subbadin Unis, MBA, 1991 ranks ae aed ginen,caleaon for rank correlation coe ‘Do the data support the cl Solution: Since are shown below Tak Acting Rast Acorn € Tinad of Seow Bie) & fe T 2 7 2 3 s 1 5 5 oe ‘ 4 1 3 4 5 . “4 6 6 0 m4 16 7 un a4 6 * 8 4 6 ° 8 1 1 0 7 3 ° i 6 5 2exe wet 7 aan” came The ret shows alow depee pone corelation tires, eg of see sd ftom she ain fhe tsk rs senate based om Teh Service mo june, Example 18.11: Ten competitors in a beauty contest are rahe by thre judges i the following order foie 1 Ogee a 4 7 pee er ere ee eer ee jae OE 8k 8 TT {Use the rank correlation coelicent to determine which pair of judge a the ‘nearest approach fo common tastes In bea. (MD Unis, MBA, 1996) Solution: The pair of judy ‘beauty can be obtained im (0) Judge 1 and judge 2 (3) Judge 2 and judge 3. (68) Judge 8 and judge 1 Calculations for comparing their ranking are shown below: eacoisiee Se icieve ea Julee fale? alge Pa RF Pa OP Ao RP rho have the nearest approach to common taste #8 93 ways a flows Ry Re Ry Toe | 8 7 7 w gens 1 1 ‘ By = See ty 8 1 6 we 8 36 6 4 Stree 16 36 4 ee ae 6 4 ° ae 4 1, 1 O25 oA Ben 4 ar 1 ee 1 1 4 Hee ete et 1 pik 4 Eat = 200 fom to Applying the formula ox Sooo _ 1200 > Toao0-5 * '~ “o90 bet 6x24, 12 5 ~ OaBIe wy BH Rant SGD Toavo= 09 70887 od 6x60 360 Faten 7!” oqo ~*~ ago ~ 88° Since the correlation coefficient Ry ~ 0.636 is largest, the judges 1 and 3 have nearest approach to common tastes in beauty. (Cane 2: Whan Ranks are nat GivenSolution: Let shown bel - on 2 a8 5 Applying the formula R= 1-7 wi 22 air = 0107 0007, 336 jon between the debenture The result shows a low degree of negative correl prices and share prices of a certain joint stock company 1 if there was any relationship between ‘gathered from 7 countries Example 13.13 An economist wanted to find ot! unemployment rate in a country and its inflation rate, Data the year 2004 are given below Couniry Unemployment Tnfltion Rate (Percent) Rate (Percent) _ x 70 3 B 85 82 c 55. 94 D 08 5.1 E 73 10.1 F 38 78 c 21 47 Find the degree of linear association between a country’s unemployment rate and its level of inflationyes Since there are sro the a each oF the te ee Tone aie gh ae Sotadon exw start ranking Ph tran, thes terns sb : is : = pence y= 2) and ales Sand Tome sarcnncn speed Spine (m3 =} ona be noted hat. Her ad oie, 9 2 ae iodo tis tsotvaatiey abo reper Psi ak nt 48, Rel 1 gio bee iz’ 79D ofa .gs75 = 0.0025 4514052 05¢05) = 1 - dnvemory tornover and “The result shows a very week postive anacaion betwee coeficient between the variables x and curingigs per sare Example 1.15: Obusn the rank correlation vals Froese etlosng paso ere eae vaste, a5 7700 “sot 8” 78 7 tale vis ras vo 5 130 120,115,160 ’ [Mangalore Univ., BCom, 1997) the variables. Moreover, Solution: Let us start ranking from lowest value for bot cele observations in both set of data are repeated, the ranking is done in cordance with suitable average value as shown below. Teale Rank ore ‘Rank —ifforne = RRP sm fy d= R= Wate faa AW cca RS oa baa, 15 4s 80 a ® 7 1s 4 3 as ok eT 50 bored me 48 Mo as 2035 ot a 5 pe mo 2 108 60 Bred 75 wo 6 n mo 9 sk Ee 225 0 0 25.00 o9 00.00 Je may be noted that for variable x, 50 is repeated thrice (m, = 3), 58 is remedies = 2) and 65 is repented twice (my = 2). Also for variable, 110 peated twice (my = 2) and 115 thie (my = 3). Applying the forelsR=1 et e BOD FO-a Le a+o°-s| 1000 =i ata SUSIS2+05 +05 +0549) _ 1 — 8x1995 _ | 887 ‘990 * = 1 ~ 0.845 = 0.155 1- 3 00 990 The result shows a weak positive association between variables x and 9, 15.5.6 Method of Loast-Squares