Statistical Data Analysis

Statistical Data Analysis is a branch of science involving data acquisition, interpretation,

validation, and analysis using quantitative research methods to quantify data and perform
statistical operations.

Importance in Business: Crucial for business intelligence organizations dealing with large
volumes of data to identify trends, patterns, and insights for making informed decisions,
improving customer experience, and enhancing sales.

Applications: Widely used in market research, business intelligence, big data analytics,
machine learning, deep learning, financial analysis, and economics.

Types of Data: Data can be categorized into variables, including univariate (singular
variables) and multivariate (multiple variables), and can be qualitative or quantitative.
Data can also be cross-sectional or time-series.

Tools Used: Common statistical analysis tools include SAS, SPSS, and StatSoft, offering
extensive data-handling capabilities and various statistical methods for comprehensive
analysis.

The two main types of Statistical Data Analysis are:

1. Descriptive Statistics: This type of analysis summarizes and describes data from a
sample in a meaningful way. It includes measures such as mean, median, standard
deviation, and variance. Descriptive statistics help illustrate the relationship between
variables in a sample or population, providing a summary of key characteristics.

2. Inferential Statistics: This method is used to make conclusions from a data sample by
employing null and alternative hypotheses that are subjected to random variation.
Techniques such as probability distribution, correlation testing, and regression analysis fall
under inferential statistics. In essence, inferential statistics utilize a random sample of data
taken from a population to make and explain inferences about the entire population.
Statistical Data Analysis involves four key steps:

1. Define the Problem: Clearly define the problem to ensure accurate data collection.

2. Collect Data: Gather data from various sources, either through experiments or
observations.

3. Analyze Data: Use exploratory and confirmatory methods to understand patterns and
answer specific questions.

4. Report Outcomes: Present findings through tables, graphs, or percentages,

acknowledging uncertainties in the results.
Least Squares Method

The Least Squares Method is a statistical technique used to find the equation of a line that
best fits a set of data points. It minimizes the sum of squared differences between the
observed and predicted values. Here's a concise summary:

Definition: The Least Squares Method finds the equation of the line of best fit for given data
by minimizing the sum of squared deviations.

Formula:
The formula used in the least squares method and the steps used in deriving the line of
best fit from this method are discussed as follows:

1. Calculate the averages of the independent variable (X) and dependent variable (Y).
2. Presume the equation of the line as y = mx + c.
3. Calculate the slope (m) using:
m = [Σ (X – xi)×(Y – yi)] / Σ(X – xi)^2
4. Calculate the intercept (c) using:
c = Y – mX

Least Square Method Graph

Let us have a look at how the data points and the line of best fit obtained from the least
squares method look when plotted on a graph.

The red points in the above plot represent the data points for the sample data available.
Independent variables are plotted as x-coordinates and dependent ones are plotted as y-
coordinates. The equation of the line of best fit obtained from the least squares method is
plotted as the red line in the graph.
We can conclude from the above graph that how the least squares method helps us to find
a line that best fits the given data points and hence can be used to make further
predictions about the value of the dependent variable where it is not known initially.

Limitations of the Least Square Method

The least squares method assumes that the data is evenly distributed and doesn’t contain
any outliers for deriving a line of best fit. But, this method doesn’t provide accurate
results for unevenly distributed data or for data containing outliers.