Chapter 3

Descriptive Statistics: Numerical Methods

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

At least (1 - 1/z22) of the items in any data set will be

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

 Chebyshev’s Theorem

Let z = 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 - z(s) = 490.80 - 1.5(54.74) = 409
and
x + z(s) = 490.80 + 1.5(54.74) = 573
 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
 Empirical Rule

For data having a bell-shaped distribution:

• Approximately 68% of the data values will be

within one standard deviation of the mean.
 Empirical Rule

For data having a bell-shaped distribution:

• Approximately 95% of the data values will be

within two standard deviations of the mean.
 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.
 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
 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
• a data value that was incorrectly included in the
data set
• a correctly recorded data value that belongs in the
data set
 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
 Exploratory Data Analysis

 Five-Number Summary
 Box Plot
 Five-Number Summary

 Smallest Value
 First Quartile
 Median
 Third Quartile
 Largest Value
 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
 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
 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 * .
 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
 Measures of Association
Between Two Variables
 Covariance
 Correlation Coefficient
 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.
 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
denoted by  xy .
 ( xi   x )( yi   y )
 xy 
N
 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
 xy
 If the data sets are populations, the coefficient is .
 xy
 xy 
 x y
 The Weighted Mean and
Working with Grouped Data
 Weighted Mean
 Mean for Grouped Data
 Variance for Grouped Data
 Standard Deviation for Grouped Data
 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.
 Weighted Mean

x = wi xi
wi

where:
xi = value of observation i
wi = weight for observation i
 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.
 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
 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
 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
 Variance for Grouped Data

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