Quantitative Methods - I

(Statistics)

Business Statistics

What is Statistics?
Statistics is the art and science of
collecting and understanding data.
Statistical techniques should be viewed as
an important part of the decision process,
It allows informed strategic decisions to be
made that combine intuition and expertise
Use of statistics is becoming increasingly
important in maintaining a competitive edge.

Why Should You Learn Statistics?

By learning statistics,
you acquire the competitive advantage of being
comfortable and competent around data and
uncertainty.

A vast amount of information is contained in

data,
but this information is often not immediately
accessible
statistics helps you extract and understand this
information.

 Text Book
Statistics For Business ,
Stine & Foster,
Second Edition, Pearson

Evaluation
Mid Term Exam
End Term Exam
Class Participation, Quizzes
and Assignments
40%

30%
30%

Attendance
Reduction of 2% from CP
(for absence in a session, without prior intimation)

ession Plan (tentative)

Session #

Topic

Chapter from
Text Book

Session 1 - 3

Chapter 1 - 4

Session 4

Introduction , Data Structures,

Summaries
Variability

Session 5, 6

Probability

Chapter 6, 7

Session 7, 8

Random Variables

Chapters 8, 9

Session 9, 10

Normal Probability Model

Chapters 12

Session
14
Session
16
Session
18
Session
20

11 -

Statistical Tests

Chapters 15 - 17

15 -

Simple Regression

Chapters 21, 22

17 -

Multiple Regression

19 -

Applications

Chapters 22, 23,

24

Chapter 5, 6

Data
Data are the different values associated with a variable.
Data Set
consists of some basic measurement or measurements of
individual items or things called elementary units,
Students
people,
households,
firms,
cities, or just about anything of interest.

The same piece or pieces of information are recorded

for each one.

Terminology
Variable
A variable is a characteristic of an item
or individual.
The type of measurement being done
A piece of information recorded for every
item (its cost, for example)

Univariate (one-variable)
Bivariate (two-variable)
Multivariate (many-variable)

Time-Series or CrossSectional?
Time-Series Data: Data values recorded in
meaningful sequence
Elementary units might be days or quarters or years
e.g., Daily Sensex close for the past 90 days
e.g., Your firms quarterly sales over the past 5 years

Cross-Sectional Data: No meaningful sequence

e.g., Sales of 30 companies
e.g., Productivity of each sales division
Easier than time series!

Panel Data

Example
Firm
IBM

Sales
66,346

Industry Group
Office Equipment

S&P Rating
A

Exxon

59,023

Fuel

A-

GE

40,482

Conglomerates

A+

AT&T

34,357

Telecommunications

A-

Example (continued)

sso
r
C
na l
o
i
t
Sec

Multivariate Data (3 variables)

Firm
IBM

Sales
66,346

Industry Group
Office Equipment

Exxon

59,023

Fuel

A-

GE

40,482

Conglomerates

A+

AT&T

34,357

Telecommunications

A-

Elementa
ry
units

Quantitati
ve variable

Nominal
Qualitative
variable

S&P Rating
A

Ordinal
Qualitative
variable

Example
Year
2003
2004
2005
2006
2007
2008
2009
2010

Unemployment Rate
5.7%
5.4%
4.9%
4.4%
5.0%
7.3%
9.9%
9.4%

e
Tim s
e
seri

Year
2003
2004
2005
2006
2007
2008
2009
2010
Elementary unit
defined by year

Example
Unemployment Rate
5.7%
5.4%
4.9%
4.4%
5.0%
7.3%
9.9%
9.4%

Quantitative data

Stock Market Time Series

Dow Jones Industrial Stock Market Index, Monthly from 1928 to early 2011

16,000
Dow Jones Stock Index, monthly
14,000
since 1928
12,000
10,000
8,000
6,000
4,000
2,000
0
1920

1930

1940

1950

1960

1970
Year

1980

1990

2000

2010

Sources of Data
Primary Data
When you control the design and data
collection
Production data from your factory
Your firms marketing studies

Secondary Data
When you use data previously collected by
others for their own purposes
Government data: economics and demographics
Media reports TV, newspapers, Internet
Companies that specialize in gathering data

Terminology
POPULATION
A population consists of all the items or individuals about
which you want to draw a conclusion.
SAMPLE
A sample is the portion of a population selected for analysis.
PARAMETER
A parameter is a numerical measure that describes a
characteristic of a population.
STATISTIC
A statistic is a numerical measure that describes a
characteristic of a sample.

Population vs. Sample

Population

Measures used to describe the

population are called parameters

Sample

Measures computed from

sample data are called statistics

Types of Variables
Categorical (qualitative) variables have
values that can only be placed into
categories, such as yes and no.
Numerical (quantitative) variables have
values that represent quantities.
Discrete quantitative variable
(such as 0 or 1, or the list 0, 1, 2, 3, , for example).

Continuous
Any quantitative variable that is not discrete.

Data Tables
Some Basic Ideas

Data are a collection of numbers, labels, or

symbols with context

A data table is a rectangular arrangement of

data with rows and columns

Observations or cases form the rows;

common attributes or variables form the
columns

Data Tables
Disorganized Data

Data Tables
Same Data in a Data Table

Data Tables

Organize data to yield meaningful information

Provide context (e.g., who, what, when)

Improve interpretability with meaningful

names, formatting and units

Data Tables

Rows describe a collection of things (items or

people) and are called observations or cases

Columns describe common attributes shared by

the items (or people) and are called variables

The number of rows in a data table is denoted

by the symbol n

Categorical and Numerical

Data
Categorical Data

Also called qualitative or nominal variables

Identify group membership

Type of purchase made and Brand of bike are

examples

Categorical and Numerical

Data
Numerical Data

Also called quantitative or continuous variables

Describe numerical properties of cases

Have measurement units

Size of bike (cm) and Amount spent (Rs.) are examples

Categorical and Numerical

Data
Measurement Scales
Nominal name categories without implying
order (categorical)
Ordinal name categories that can be ordered
(categorical)
Interval numerical values that can be added
or subtracted (no absolute zero)
Ratio numerical values that can be added,
subtracted, multiplied or divided (makes ratio
comparisons possible)

Categorical and Numerical

Data
Likert Scale (Ordinal 5 to 7
Categories)

Recoding and Aggregation

Recode: building a new variable

from another (recoding price into
expensive or inexpensive)

Aggregate: reduce rows in a data

table by counting or summing values
within categories

Recoding and Aggregation

An Example of Aggregation

 Q 1.Consider the information about selected cell

phones shown in Table
a. What is the elementary unit for this data set?
b. Is this a univariate, bivariate, or multivariate data
set?
c. Is this a cross-sectional or time-series data set?
d. Is Service Provider quantitative, ordinal, or
nominal?
e. Is Price quantitative, ordinal, or nominal?
f. Is Screen Size quantitative, ordinal, or nominal?

Q 2.Consider the information about selected cell phones shown in

Table 2.6.5.

a. What is the elementary unit for this data set?

Models (of cell phones) are elementary units.
b. Is this a univariate, bivariate, or multivariate data set?
Multivariate
c. Is this a cross-sectional or time-series data set?
Cross-sectional.
d. Is Service Provider quantitative, ordinal, or nominal?
Nominal.
e. Is Price quantitative, ordinal, or nominal?
Quantitative.
f. Is Screen Size quantitative, ordinal, or nominal?
Ordinal.