Slides Prepared by

JOHN S. LOUCKS
St. Edward’s University

© 2002 South-Western /Thomson Learning

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 Chapter 3
Descriptive Statistics: Numerical Methods



Measures of Location
Measures of Variability 
 Measures of Relative Location and Detecting Outliers
 Exploratory Data Analysis
 Measures of Association Between Two Variables
 The Weighted Mean and
Working with Grouped Data
%
x  Slide
2
 Measures of Location

 Mean
 Median
 Mode
 Percentiles
 Quartiles

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 Example: Apartment Rents

Given below is a sample of monthly rent values ($)

for one-bedroom apartments. The data is a sample of 70
apartments in a particular city. The data are presented
in ascending order.
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Mean

 The mean of a data set is the average of all the data

values.

xIf the data are from a sample, the mean is denoted by
.
 xi
x
n

 If the data are from a population, the mean is denoted

by  (mu).
 xi

N

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 Example: Apartment Rents

 Mean
 xi 34, 356
x   490.80
n 70
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Median

 The median is the measure of location most often

reported for annual income and property value data.
 A few extremely large incomes or property values
can inflate the mean.

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 Median

 The median of a data set is the value in the middle

when the data items are arranged in ascending order.
 For an odd number of observations, the median is the
middle value.
 For an even number of observations, the median is
the average of the two middle values.

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 Example: Apartment Rents

 Median
Median = 50th percentile
i = (p/100)n = (50/100)70 = 35.5
Averaging the 35th and 36th data values:
Median = (475 + 475)/2 = 475
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Mode

 The mode of a data set is the value that occurs with

greatest frequency.
 The greatest frequency can occur at two or more
different values.
 If the data have exactly two modes, the data are
bimodal.
 If the data have more than two modes, the data are
multimodal.

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 Example: Apartment Rents

 Mode
450 occurred most frequently (7 times)
Mode = 450
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Percentiles

 A percentile provides information about how the

data are spread over the interval from the smallest
value to the largest value.
 Admission test scores for colleges and universities
are frequently reported in terms of percentiles.

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 Percentiles

 The pth percentile of a data set is a value such that at least

p percent of the items take on this value or less and at least
(100 - p) percent of the items take on this value or more.
• Arrange the data in ascending order.
• Compute index i, the position of the pth percentile.

i = (p/100)n
• If i is not an integer, round up. The p th percentile is
the value in the i th position.
• If i is an integer, the p th percentile is the average of the
values in positions i and i +1.

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 Example: Apartment Rents

 90th Percentile
i = (p/100)n = (90/100)70 = 63
Averaging the 63rd and 64th data values:
90th Percentile = (580 + 590)/2 = 585
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Quartiles

 Quartiles are specific percentiles

 First Quartile = 25th Percentile
 Second Quartile = 50th Percentile = Median
 Third Quartile = 75th Percentile

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 Example: Apartment Rents

 Third Quartile
Third quartile = 75th percentile
i = (p/100)n = (75/100)70 = 52.5 = 53
Third quartile = 525
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Measures of Variability

 It is often desirable to consider measures of

variability (dispersion), as well as measures of
location.
 For example, in choosing supplier A or supplier B we
might consider not only the average delivery time for
each, but also the variability in delivery time for each.

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 Measures of Variability

 Range
 Interquartile Range
 Variance
 Standard Deviation
 Coefficient of Variation

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 Range

 The range of a data set is the difference between the

largest and smallest data values.
 It is the simplest measure of variability.
 It is very sensitive to the smallest and largest data
values.

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 Example: Apartment Rents

 Range
Range = largest value - smallest value
Range = 615 - 425 = 190
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Interquartile Range

 The interquartile range of a data set is the difference

between the third quartile and the first quartile.
 It is the range for the middle 50% of the data.
 It overcomes the sensitivity to extreme data values.

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 Example: Apartment Rents

 Interquartile Range
3rd Quartile (Q3) = 525
1st Quartile (Q1) = 445
Interquartile Range = Q3 - Q1 = 525 - 445 = 80
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Variance

 The variance is a measure of variability that utilizes

all the data.
 It is based on the difference between the value of
each observation (xi) and the mean (x for a sample, 
for a population).

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 Variance

 The variance is the average of the squared differences

between each data value and the mean.
 If the data set is a sample, the variance is denoted by
s2.
2
 ( xi  x )
s2 
n 1

 If the data set is a population, the variance is denoted

by 2.
2
 ( x   )
2  i
N

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 Standard Deviation

 The standard deviation of a data set is the positive

square root of the variance.
 It is measured in the same units as the data, making it
more easily comparable, than the variance, to the
mean.
 If the data set is a sample, the standard deviation is
denoted s. s  s 2

 If the data set is a population, the standard deviation

is denoted  (sigma).   2

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 Coefficient of Variation

 The coefficient of variation indicates how large the

standard deviation is in relation to the mean.
 If the data set is a sample, the coefficient of variation
is computed as follows:
s
(100)
x
 If the data set is a population, the coefficient of
variation is computed as follows:

(100)


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 Example: Apartment Rents

 Variance

s2

 ( xi  x ) 2
 2 ,996.16
n 1
 Standard Deviation

s  s 2  2996. 47  54. 74
 Coefficient of Variation
s 54. 74
 100   100  11.15
x 490.80

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 Measures of Relative Location
and Detecting Outliers
 z-Scores
 Chebyshev’s Theorem
 Empirical Rule
 Detecting Outliers

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 z-Scores

 The z-score is often called the standardized value.

 It denotes the number of standard deviations a data
value xi is from the mean.
xi  x
zi 
s
 A data value less than the sample mean will have a z-
score less than zero.
 A data value greater than the sample mean will have
a z-score greater than zero.
 A data value equal to the sample mean will have a z-
score of zero.

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 Example: Apartment Rents

 z-Score of Smallest Value (425)

xi  x 425  490.80
z   1. 20
s 54. 74
Standardized Values for Apartment Rents
-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

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 Chebyshev’s Theorem

At least (1 - 1/k22) of the items in any data set will be

within k standard deviations of the mean, where k is
any value greater than 1.
• At least 75% of the items must be within
k = 2 standard deviations of the mean.
• At least 89% of the items must be within
k = 3 standard deviations of the mean.
• At least 94% of the items must be within
k = 4 standard deviations of the mean.

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 Example: Apartment Rents

 Chebyshev’s Theorem

Let k = 1.5 with x = 490.80 and s = 54.74

At least (1 - 1/(1.5)2) = 1 - 0.44 = 0.56 or 56%

of the rent values must be between
x - k(s) = 490.80 - 1.5(54.74) = 409
and
x + k(s) = 490.80 + 1.5(54.74) = 573

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 Example: Apartment Rents

 Chebyshev’s Theorem (continued)

Actually, 86% of the rent values
are between 409 and 573.
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Empirical Rule

For data having a bell-shaped distribution:

• Approximately 68% of the data values will be

within one standard deviation of the mean.

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 Empirical Rule

For data having a bell-shaped distribution:

• Approximately 95% of the data values will be

within two standard deviations of the mean.

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 Empirical Rule

For data having a bell-shaped distribution:

• Almost all (99.7%) of the items will be

within three standard deviations of the mean.

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 Example: Apartment Rents

 Empirical Rule
Interval % in Interval
Within +/- 1s 436.06 to 545.54 48/70 = 69%
Within +/- 2s 381.32 to 600.28 68/70 = 97%
Within +/- 3s 326.58 to 655.02 70/70 = 100%
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Detecting Outliers

 An outlier is an unusually small or unusually large

value in a data set.
 A data value with a z-score less than -3 or greater
than +3 might be considered an outlier.
 It might be an incorrectly recorded data value.
 It might be a data value that was incorrectly included
in the data set.
 It might be a correctly recorded data value that
belongs in the data set !

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 Example: Apartment Rents

 Detecting Outliers
The most extreme z-scores are -1.20 and 2.27.
Using |z| > 3 as the criterion for an outlier,
there are no outliers in this data set.
Standardized Values for Apartment Rents
-1.20 -1.11 -1.11 -1.02 -1.02 -1.02 -1.02 -1.02 -0.93 -0.93
-0.93 -0.93 -0.93 -0.84 -0.84 -0.84 -0.84 -0.84 -0.75 -0.75
-0.75 -0.75 -0.75 -0.75 -0.75 -0.56 -0.56 -0.56 -0.47 -0.47
-0.47 -0.38 -0.38 -0.34 -0.29 -0.29 -0.29 -0.20 -0.20 -0.20
-0.20 -0.11 -0.01 -0.01 -0.01 0.17 0.17 0.17 0.17 0.35
0.35 0.44 0.62 0.62 0.62 0.81 1.06 1.08 1.45 1.45
1.54 1.54 1.63 1.81 1.99 1.99 1.99 1.99 2.27 2.27

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 Exploratory Data Analysis

 Five-Number Summary
 Box Plot

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 Five-Number Summary

 Smallest Value
 First Quartile
 Median
 Third Quartile
 Largest Value

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 Example: Apartment Rents

 Five-Number Summary
Lowest Value = 425 First Quartile = 450
Median = 475
Third Quartile = 525 Largest Value = 615
425 430 430 435 435 435 435 435 440 440
440 440 440 445 445 445 445 445 450 450
450 450 450 450 450 460 460 460 465 465
465 470 470 472 475 475 475 480 480 480
480 485 490 490 490 500 500 500 500 510
510 515 525 525 525 535 549 550 570 570
575 575 580 590 600 600 600 600 615 615

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 Box Plot

 A box is drawn with its ends located at the first and

third quartiles.
 A vertical line is drawn in the box at the location of
the median.
 Limits are located (not drawn) using the interquartile
range (IQR).
• The lower limit is located 1.5(IQR) below Q1.
• The upper limit is located 1.5(IQR) above Q3.
• Data outside these limits are considered outliers.
… continued

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 Box Plot (Continued)

 Whiskers (dashed lines) are drawn from the ends of

the box to the smallest and largest data values inside
the limits.
 The locations of each outlier is shown with the
symbol * .

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 Example: Apartment Rents

 Box Plot

Lower Limit: Q1 - 1.5(IQR) = 450 - 1.5(75) = 337.5

Upper Limit: Q3 + 1.5(IQR) = 525 + 1.5(75) = 637.5
There are no outliers.

37 40 42 45 47 50 52 550 575 600 625

5 0 5 0 5 0 5

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 Measures of Association
Between Two Variables
 Covariance
 Correlation Coefficient

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 Covariance

 The covariance is a measure of the linear association

between two variables.
 Positive values indicate a positive relationship.
 Negative values indicate a negative relationship.

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 Covariance

 If the data sets are samples, the covariance is denoted

by sxy.
 ( xi  x )( yi  y )
sxy 
n 1
 If the data sets are populations, the covariance is
 xy by
denoted .
 ( xi   x )( yi   y )
 xy 
N

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 Correlation Coefficient

 The coefficient can take on values between -1 and +1.

 Values near -1 indicate a strong negative linear relationship.
 Values near +1 indicate a strong positive linear relationship.
 If the data sets are samples, the coefficient is rxy.

sxy
rxy 
sx s y
 If the data sets are populations, the coefficient is .
 xy
 xy   xy
 x y

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 The Weighted Mean and
Working with Grouped Data
 Weighted Mean
 Mean for Grouped Data
 Variance for Grouped Data
 Standard Deviation for Grouped Data

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 Weighted Mean

 When the mean is computed by giving each data

value a weight that reflects its importance, it is
referred to as a weighted mean.
 In the computation of a grade point average (GPA),
the weights are the number of credit hours earned for
each grade.
 When data values vary in importance, the analyst
must choose the weight that best reflects the
importance of each value.

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 Weighted Mean

x = wi xi
wi

where:
xi = value of observation i
wi = weight for observation i

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 Grouped Data

 The weighted mean computation can be used to

obtain approximations of the mean, variance, and
standard deviation for the grouped data.
 To compute the weighted mean, we treat the
midpoint of each class as though it were the mean of
all items in the class.
 We compute a weighted mean of the class midpoints
using the class frequencies as weights.
 Similarly, in computing the variance and standard
deviation, the class frequencies are used as weights.

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 Mean for Grouped Data

 Sample Data
x
 fMi i

f i

 Population Data

  fMi i

N
where:
fi = frequency of class i
Mi = midpoint of class i

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 Example: Apartment Rents

Given below is the previous sample of monthly rents

for one-bedroom apartments presented here as grouped
data in the form of a frequency distribution.
Rent ($) Frequency
420-439 8
440-459 17
460-479 12
480-499 8
500-519 7
520-539 4
540-559 2
560-579 4
580-599 2
600-619 6
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 Example: Apartment Rents

 Mean for Grouped Data

Rent
Rent ($)
($) ff ii M
Mii ff iiM
Mii
420-439
420-439 88 429.5
429.5 3436.0
3436.0 34, 525
x  493. 21
440-459
440-459 17
17 449.5
449.5 7641.5
7641.5 70
460-479
460-479 12
12 469.5
469.5 5634.0
5634.0
This approximation
480-499
480-499 88 489.5
489.5 3916.0
3916.0
500-519 77 509.5 3566.5
differs by $2.41 from
500-519 509.5 3566.5
520-539
520-539 44 529.5
529.5 2118.0
2118.0 the actual sample
540-559
540-559 22 549.5
549.5 1099.0
1099.0 mean of $490.80.
560-579
560-579 44 569.5
569.5 2278.0
2278.0
580-599
580-599 22 589.5
589.5 1179.0
1179.0
600-619
600-619 66 609.5
609.5 3657.0
3657.0
Total
Total 70
70 34525.0
34525.0

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 Variance for Grouped Data

 Sample Data
 f i ( M i  x ) 2
s2 
n 1
 Population Data
 f i ( M i   ) 2
2 
N

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 Example: Apartment Rents

 Variance for Grouped Data

s 2  3, 017.89

 Standard Deviation for Grouped Data

s  3, 017.89  54. 94

This approximation differs by only $.20

from the actual standard deviation of $54.74.

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End of Chapter 3

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