MEASURES OF

DISPERSION
 Measures of Variability
No. of Days Required to Fill Orders
ABC Co. XYZ Co.
0.5 0.5

0.4 0.4

0.3 0.3
10
0.2 11 0.2
10
0.1 0.1 7
9 8 11 12 13 15

Number of Number of
Working Days Working Days
 Measures of Variability

Absolute Measures of Dispersion: Where the values of the measure

are in absolute units.

Relative Measures of Dispersion: Where the values of the measure

are in relative units like coefficient or in % terms.
 RANGE

It is the simplest measure of dispersion or variability. It is the

Largest Value - Smallest Value in the data set. It is usually used in
situations like variability in day’s temperature or variability in intra-
day share price of a stock etc..
 INTER-QUARTILE RANGE

IQR = Q3 - Q1
IQR is used to avoid the influence of extreme values
It is the range of middle 50% of the values
IQR is used in finding (calculating) the boundaries while plotting
Box-and-Whisker Plot
Suppose the salaries of the freshers on their first job in $:
2710, 2755, 2850, 2880, 2880, 2890, 2920, 2940, 2950, 3050, 3130, 3325
 VARIANCE
It is measure of variability that utilizes all the data of a data set.
It is based on the difference between each x i and the mean and this
difference is called a deviation about the mean.
For sample it is represented as (xi - x bar) and for the population it is
represented as (xi - µ).
Population variance is denoted by σ 2 - It is the average of the
squared deviation.
Population Variance σ2 = ∑(xi - µ)2 / N
Sample Variance s2 = ∑(xi - x bar)2 / n - 1 (unbiased estimator of
population variance (Bessel’s Correction).
 VARIANCE

Class-size data: Number of students in class - 46, 54, 42, 46, 32

Points to be noted:
• The deviation about the mean always sum upto zero
• The squared deviation about the mean also squares the unit
associated with the variable. In the above example it would be
(students)2
 STANDARD DEVIATION

It is defined as the positive square root of the variance.

Sample Standard Deviation = s = √s2
Population Standard Deviation = σ = √σ2
 STANDARD DEVIATION
A production department uses a sampling procedure to test the
quality of newly produced items. The department employs the
following decision rule at an inspection station: If a sample of 14
items has a variance of more than 0.005, the production line must be
shut down for repairs. Suppose the following data have just been
collected:

3.43 3.45 3.43 3.48 3.52 3.50 3.39

3.48 3.41 3.38 3.49 3.45 3.51 3.50

Should the production line be shut down? Why or why-not?

 COEFFICIENT OF VARIATION

• It measures the standard deviation relative to the mean.

• C.V. = (Standard Deviation / Mean) * 100
• It says what % of Mean is S.D.
 COEFFICIENT OF VARIATION

• It measures the standard deviation relative to the mean.

• C.V. = (Standard Deviation / Mean) * 100
• It says what % of Mean is S.D.
• When packages are stored in trucks in preparation for delivery, two
major constraints have to be considered - the weight (in pounds) and
the volume (in cu.ft.) for each item. Suppose that in a sample of 200
packages, the average weight is 26 pounds, with a S.D. of 3.9
pounds; and the average volume for each of these packages is 8.8
cu.ft., with a S.D. of 2.2 cu.ft. How can the variation of the weight
and the volume be compared?
 COEFFICIENT OF VARIATION

• There are number of possible measures of sales performance,

including how consistent a salesperson is in meeting the established
sales goals. The data that follow represent the % of goal met by each
of three salespeople over the last 5 years.

Pat 88 68 89 92 103
John 76 88 90 86 79
Frank 104 88 118 88 123
Which salesperson is most consistent?
 CHEBYSHEV’S THEOREM

At least (1 - 1/z2) of the data values must be within ‘z’ standard

deviations of the mean, where ‘z’ is any value greater than 1. It means
that with z = 2, 3 & 4 standard deviations,
At least .75 or 75% of data values (1 - 1/2 2) = (1 - 1/4) = (1 - 0.25)
must be within z = 2 standard deviations of the mean.
At least (1 - 1/32) = .89 or 89% of the data values must be within z =
3 standard deviations of the mean.
At least (1 - 1/42) = .94 or 94% of the data values must be within z =
4 standard deviations of the mean.
 CHEBYSHEV’S THEOREM

Assume that the midterm test scores for 100 students in a college
business statistics course had a mean of 70 and a standard deviation
of 5. How many students had test scores between 60 & 80? How
many students had test scores between 58 & 82?.
 EMPIRICAL RULE

For the data having a bell-shaped or symmetrical distribution:

Approximately 68% of the data values will be within one S.D. of the
mean
Approximately 95% of the data values will be within two S.D. of the
mean
Approximately 99.72% of the data values will be within three S.D. of
the mean