Descriptive Statistics: Analyzing Distributions

Business Analytics
Descriptive Statistics
Analyzing Distributions
Lecture # 04
1
TOPICS to be COVERED
01 Percentiles
02 Quartiles
03 Variance
04 Standard Deviation
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• Distributions are very useful for interpreting
and analyzing data.
• A distribution describes the overall variability
of the observed values of a variable.
• In this section we introduce additional ways of
analyzing distributions.
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• Percentiles
• Quartiles
• Z- score
• Empirical Rule
• Box Plots
Percentile
• A percentile is the value of a variable at which a
specified (approximate) percentage of
observations are below that value.
• The pth percentile tells us the point in the data

where approximately p% of the observations
have values less than the pth percentile; hence,
approximately (100 − p)% of the observations
have values greater than the pth percentile.
• Percentile:
The value below which a percentage of data falls.
Example
• If a child's weight is at the 50th percentile line,
that means that out of 100 normal children
her age, 50 will be bigger than she is and 50
smaller.
• Similarly, if she is in the 75th percentile, that
means that she is bigger than 75 children and
smaller than only 25, compared with 100
children her age.
Examples:
Colleges and universities frequently report admission test
scores in terms of percentiles.
• For instance, suppose an applicant obtains a raw score of 54

on the verbal portion of an admission test. How this student
performed in relation to other students taking the same test
may not be readily apparent.
• However, if the raw score of 54 corresponds to the 70th

percentile, we know that approximately 70% of the students
scored lower than this individual, and approximately 30% of
the students scored higher.
To calculate the pth percentile for a data set containing n observations we must first
arrange the data in ascending order (smallest value to largest value).
Exercise:
Compute the 85th percentile for the home sales

data in Table 2.9.
# selling price
1 108,000
2 138,000
3 138,000
4 142,000
5 186,000
6 199,500
7 208,000
8 254,000
9 254,000
10 257,500
11 298,000
12 456,250
• with p = 85 and n = 12, the location of the
• 85th percentile is
• The interpretation of L85 = 11.05
• i.e. the 85th percentile is 5% of the way between

the value in position 11 and the value in position
12.
OR
• the 85th percentile is the value in position 11
(298,000) plus 0.05 times the difference
between the value in position 12 (456,250) and
the value in position 11 (298,000).
Thus,85th percentile
=298,000+ 0.05(456,250- 298,000)
=298,000 +0.05(158,250)
=305,912.50
• Therefore, $305,912.50 represents the 85th

percentile of the home sales data.
Quartiles
•• When the data is divided into four equal parts:
– Each part contains approximately 25% of the
observations
– Division points are referred to as quartiles
= first quartile, or 25th percentile

= Second quartile, or 50th percentile (also the median)
= Third quartile, or 75th percentile
• To demonstrate quartiles, the home sales data
are again arranged in ascending order
# Selling Price
1. 108,000 7. 208,000
2. 138,000 8. 254,000
3. 138,000 9. 254,000
4. 142,000 10. 257,500
5. 186,000 11. 298,000
6. 199,500 12. 456,250
• We already identified Q2, the second quartile
(median) as 203,750 (as calculated earlier)
• To find Q1 and Q3 we must find the 25th and
75th percentiles.
• Therefore, for the home sale data
• 25th percentile is $139,000
• 50th percentile is $203,750
• 75th percentile is $256,625.
• So, The quartiles divide the home sales data into four
parts, with each part containing 25% of the observations.
108,000 138,000 138,000 ,

142,000 186,000 199,500 ,
208,000 254,000 254,000 ,
257,500 298,000 456,250
• The difference between the third and first
quartiles is often referred to as the interquartile
range, or IQR.
• For the home sales data,
IQR =Q3 -Q1
256,625 - 139,000 = 117,625.
Because it excludes the smallest and largest 25% of
values in the data, the IQR is a useful measure of
variation for data that have extreme values or are
highly skewed.
Variance
• The variance is a measure of variability that
utilizes all the data. The variance is based on
the deviation about the mean, which is the
difference between the value of each
observation (xi ) and the mean
Standard Deviation
• The standard deviation is defined to be the
positive square root of the variance. We use ‘s’
to denote the sample standard deviation and
to denote the population standard deviation.
Table 2.12
The sample variance for the sample of class sizes in five college classes is
s^2 =64.
Thus,
the sample standard deviation is = 8.
Coefficient of Variation
• In some situations we may be interested in a
descriptive statistic that indicates how large
the standard deviation is relative to the mean.
This measure is called the coefficient of
variation and is usually expressed as a
percentage.
• we found a sample mean of 44 and a sample
standard deviation of 8.
• The coefficient of variation is (8/44 * 100)
18.2%.
Thank You !
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Business Analytics

• The pth percentile tells us the point in the data

• For instance, suppose an applicant obtains a raw score of 54

• However, if the raw score of 54 corresponds to the 70th

Compute the 85th percentile for the home sales

• i.e. the 85th percentile is 5% of the way between

• Therefore, $305,912.50 represents the 85th

= first quartile, or 25th percentile

108,000 138,000 138,000 ,

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