Measures

Measures of
of Dispersion
Dispersion
or
or Variation
Variation
Introduction

1
Objectives of studying variation

o Sometimes the average alone cannot

adequately describe a set of
observations.

2
 Example
Factory A Factory B Factory C
monthly wages monthly monthly wages
( Rs.) wages ( Rs.) ( Rs.)
2300 2310 2380
2300 2300 2210
2300 2304 2220
2300 2306 2200
2300 2280 2490

Total 11,500 11,500 11,500

3
Average 2,300 2,300 2,300
 Observations:
 Since the average wage is same in all
factories, one is likely to conclude
that the factories are alike in their
wage structure.
 But a close examination will reveal
that the wage distribution in three
factories differs widely from one
another.

4
 In factory A , each and every worker
is getting the same wage, so there is
no variation.
 In factory B, there is slight variation
whereas in factory C, there is wide.
variation

5
Conclusion:
The measures of central tendency,
therefore, insufficient. It must be
supported by some other measures to
reveal the true characteristics of the
data.

6
 Measures of Variation
• Knowing the measures of central
tendency is not enough
• Both of the distributions below have
identical measures of central
tendency

3-7
Figure 3.13
 Definition
A measure of variation is designed to
measure to what extent the
individual observation differ from it’s
average.

8
 Measures of Dispersion

It measures of dispersion the variability

of a data set.
•Measures of dispersion include:
 Range
 Quartile deviation
 Mean Absolute Deviation (MAD)
 Variance and Standard Deviation
 Coefficient of Variation (CV)

9
Desired Qualities of a good
measure of Variation
1. It should be easy to understand and
calculate.
2. It should be rigidly defined.
3. It should be based on all the values.
4. It should not be affected too much by
abnormal extreme values.
5. It should be capable for further statistical
analysis.

10
 The Range
 Simplest measure of variation
 Range of a data is the difference between
largest (L) and smallest (S) value.

R= L- S
Coeffient of range = L-S
L+S

11
 The Range
DCOVA
 Simplest measure of variation
 Difference between the largest and the smallest values:

Range  Maximum Value  Minimum Value

Range = Xlargest – Xsmallest

Example:
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Range = 13 - 1 = 12
12
 Measures of Dispersion
• Calculate the range using the data
from the Growth and Value funds:

13
 EXERCISE
• The following are the prices of shares of a
company from Monday to Friday. Calculate Range
and Coeffient of range

Day Price($)

Monday 190-200

Tuesday 200-210

Wednesday 210-220

Thursday 220-230

Friday 230-240

14
 Relative Meseaures of
Dispersion
• Coefficient of Range

• (L-S)
• (L+S)

15
Semi-interquartile range
or quartile deviation.

Q.D = (Q3 – Q1) / 2

16
Example: Calculate Quartile Deviation and its
coefficient from the following data
Weekly Income (Rs) No. of workers f c.f.

Below 350 8
350-370 16
370-390 39
390-410 58
410-430 60
430-450 40
450-470 22
470-490 15
490-510 15

510-530 9
530 and above 10 17
 Measures of Dispersion
• Q1 = size of N th observation
4
= 292 = 73rd observation
4
Q1 lies in the class 390 – 410.
Q1 = L + N/4 – p.c.f. X I
f
= 393.448
Q3 = 449 QD=
18
 Relative Meseaures of
Dispersion
• Coefficient of Quartile Deviation
• (Q3 - Q1 )
• (Q3 + Q1 )

19
Mean Absolute Deviation

 MAD is an average of the absolute

differences between the observations and
the mean.

Sample MAD 
 xi  x
n

Population MAD 
 xi  
N

20
Steps:
1. Calculate absolute deviation
( remove negative signs) from mean.

2. Add all the deviations.

3. Divide the sum of the deviations by

total no of observations.

21
 Variance and Standard
Deviation
Population Variance :The average of
the squared deviations of all
the population measurements
from the mean

Population S.D. :The square root

of the variance

22
Variance and Standard deviation

For a given population,

  x  
2

 2
 i
and   2

N
Root mean of squared deviations of
values from the mean

23
 The Sample Variance
DCOVA
• Root mean of squared deviations of
values from the mean
n

– Sample variance:  (X  X) i
2

S 2 i1
n -1
Where X = arithmetic mean
n = sample size
Xi = ith value of the variable X
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 The Sample Standard Deviation

• Most commonly used measure of

variation
• Shows variation about the mean
• Is the square root of the variance
• Has the same units as the original data
Sample standard deviation:
n

 (X  X)
i
2

S i1
n -1
 Measures of Variation:
The Standard Deviation
DCOVA
Steps for Computing Standard Deviation

1. Compute the difference between each value and

the mean.
2. Square each difference.
3. Add the squared differences.
4. Divide this total by n-1 to get the sample variance.
5. Take the square root of the sample variance to get
the sample standard deviation.

26
 Measures of Variation:
Sample Standard Deviation:
Calculation Example
DCOVA
Sample
Data (Xi) : 10 12 14 15 17 18 18 24

n=8 Mean = X = 16

(10  X)2  (12  X)2  (14  X)2    (24  X)2

S
n 1

(10  16)2  (12  16) 2  (14  16) 2    (24  16)2


8 1

130 A measure of the “average”

  4.3095 scatter around the mean
7 27
 Comparing Standard
Deviations
Data A
Mean = 15.5

11 12 13 14 15 16 17 18
S = 3.338
19 20 21
Data B Mean = 15.5
S = 0.926
11 12 13 14 15 16 17 18
19 20 21
Data C Mean = 15.5
S = 4.567
11 12 13 14 15 16 17 18
19 20 21
28
 Comparing Standard
Deviations

Smaller standard deviation

Larger standard deviation

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 :
Summary Characteristics
 The more the data are spread out, the greater the
range, variance, and standard deviation.

 The more the data are concentrated, the smaller the

range, variance, and standard deviation.

 If the values are all the same (no variation), all these
measures will be zero.

 None of these measures are ever negative.

30
 Measures of Variation:
The Coefficient of Variation
DCOVA
• Measures relative variation
• Always in percentage (%)
• Shows variation relative to mean
• Can be used to compare the variability of two or
more sets of data measured in different units

 S
CV     100%

X  31
 Measures of Variation:
Comparing Coefficients of Variation

• Stock A:
– Average price last year = $50
– Standard deviation = $5
S $5
CVA     100%   100%  10% Both stocks have
X $50 the same
standard
deviation, but
• Stock B: stock B is less
– Average price last year = $100 variable relative
to its price
– Standard deviation = $5
S $5
CVB     100%   100%  5%
X $100
32
 Measures of Variation:
Comparing Coefficients of Variation (con’t)
• Stock A:
DCOVA
– Average price last year = $50
– Standard deviation = $5
S $5
 
CVA     100%   100%  10%
X $50 Stock C has a
much smaller
• Stock C: standard
deviation but a
– Average price last year = $8 much higher
– Standard deviation = $2 coefficient of
variation
 S  $2
CVC     100%   100%  25%

X  $8
33
 Measures of Dispersion
• Calculate the coefficient of variation
(CV) using the data from the Growth
fund and the Value fund.

34
• ASSIGNMENT

35
 Solution

• Mean= 130
• Variance= 2,200
• S.D= 46.9042

36
 Solution
• Since calories and the amount of sugar
have different units of measurements, C.V.
is needed to compare the variability in the
two measurements.
• CV (calories) = 36.08%
• CV (sugar) = 57.84%
• Relative to the mean , the amount of sugar
is much more variable than calories.

37
 Solution
• Section B is larger in bill.

• CVa = 1.56%

• CVb = 2.57%

38
 Skewness
The term ‘Skewness’ refers to lack of
symmetry or departure from
symmetry.

39
When a distribution is not symmetrical
(i.e. asymmetrical), it is called a skewed
distribution.

40
 1.Karl Pearson’s Coefficient of
Skewness
Karl Pearson’s Coefficient of Skewness = Mean- Mode
σ
It is independent of the unit of measurement.

If the mode is ill-defined, the modified formula is

Coefficient of Skp = 3(Mean- Median)
σ

The coefficient lies between ±1 for moderately

skewed distribution.
41
2. Bowley’s Coefficient of Skewness
This method is based on Quartiles. The
formula is:
Sk B = (Q3 –Q2) – (Q2 –Q1 )
(Q3 –Q1 )

= Q3 +Q1 -2 Med.
(Q3 –Q1 )
This method is useful in case of open-end
distribution and where extreme values are
present.
42
 3. Kelly’s Coefficient of
Skewness
• Sk k = P90 – 2 P50 + P10
P90 – P10

• Sk k = D9 – 2 D5 + D1
D 9 – D1

43
It should be noted that the three different
formulae of calculating skewness are based
on different assumptions and hence the
answer obtained from the same question by
different method may differ.

44
Q1. The following data relate to the profits
of 1,000 companies: Calculate coefficient
of skewness and comment on its value.
Annual Profits ( crore) No. of companies

10-12 17

12-14 53

14-16 199

16-18 194

18-20 327

20-22 208

22-24 2
45
• Mean= 17.786
• Mode= 19.056
• S.D.= 2.52
• SKp= -0.504 ( moderate negatively skewed)

• The mode is greater by an amount equal to about

50.4 per cent of the value of s.d.

46
Q2.The following table gives the distribution of
daily wages of 500 unskilled workers in a factory:
a)Obtain the limits of daily wages of central 50 per
cent of the observed workers.
b)Calculate Bowley’s Coefficient of Skewness .
Daily wages No. of workers

Below 200 10

200-250 25

250-300 145

300-350 220

350-400 70

400 and above 30

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• Q1 = 281.03

• Q3 = 344.32
• Hence the daily wages of central 50% of workers lies between
281.03/- and 344.32 .

• Sk B = -0.102

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 KURTOSIS
Kurtosis refers to the degree of flatness
or peakedness in the distribution.

49
If the curve is more peaked than the
normal curve it is called ‘leptokurtic’.
If it is more flat-topped than the
normal curve it is called ‘platykurtic’.
The normal curve itself is known as
‘mesokurtic’.

50
 Calculation of Kurtosis
• μ1 = ∑(x- x )/N ( mean)
• μ2 = ∑(x- x )2/N ( variance)

• μ3= ∑(x- x )3/N

• μ4 = ∑(x- x )4/N

51
 Calculation of Kurtosis
• Kurtosis ß 2 = ( μ4 / μ2 2 ) -3

∑(x- x ) 4 -3
σ

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