Professional Documents
Culture Documents
To all PGDM
Students
from
Ritesh Singhal
{M.Sc.(Maths), MIT, M.Phil.}
Ritesh Singhal
Statistics
The systematic and scientific treatment of
quantitative measurement is precisely
known as statistics.
Statistics may be called as science of
counting.
Statistics is concerned with the collection,
classification (or organization),
presentation and analysis of data which
are measurable in numerical terms.
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Stages of Statistical Investigation
Collection of Data
Organization of data
Presentation of data
Analysis
Interpretation of Results
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Statistics
It is divided into two major parts: Descriptive and
Inferential Statistics.
Descriptive statistics, is a set of methods to describe
data that we have collected. i.e. summarization of data.
Inferential statistics, is a set of methods used to
make a generalization, estimate, prediction or decision.
When we want to draw conclusions about a distribution.
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Collection of Data
Data can be collected by two ways:
>>> Primary Data Collection
It is the data collected by a particular person
or organization for his own use.
>>> Secondary Data Collection
It is the data collected by some other person
or organization, but the investigator also
get it for his use.
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Methods of Primary data collection
Direct personal interview
Data through questionnaire
Indirect investigation
Etc.
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Methods of Secondary data collection
Data collected through newspapers &
periodicals.
Data collected from research papers.
Data collected from government
officials.
Data collected from various NGO, UN,
UNESCO, WHO, ILO, UNICEF etc.
Other published resources
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Classification of data
Classification is a process of
arranging data into sequences and
groups according to their common
characteristics or separating them
into different but related parts.
It is a process of arranging data into
various homogeneous classes and
subclasses according to some
common characteristics.
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Presentation of Data
Data should be presented in such a
manner, so that it may be easily
understood and grasped, and the
conclusion may be drawn promptly from
the data presented. e.g.
>>> Histogram
>>> Frequency polygon & curve
>>> Pie Chart
>>> Ogives
>>> Pictogram & Cartogram
>>> Bar Chart
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Variables
Discrete Variable
e.g. No. of books, table, chairs
Continuous Variable
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Frequency Distribution
The observations can be recorded by three
ways:
1. Individual Series
Data recorded for individual member.
2. Discrete Series
This variable can assume values after an
interval (or jumps).
3. Continuous Series
Here the variable may be having any value,
integer or fraction.
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Statistics functions & Uses
It simplifies complex data
It provides techniques for comparison
It studies relationship
It helps in formulating policies
It helps in forecasting
It is helpful for common man
Statistical methods merges with speed of
computer can make wonders; SPSS, STATA
MATLAB, MINITAB etc.
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Scope of Statistics
In Business Decision Making
In Medical Sciences
In Actuarial Science
In Economic Planning
In Agricultural Sciences
In Banking & Insurance
In Politics & Social Science
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Distrust & Misuse of Statistics
Statistics is like a clay of which one
can make a God or Devil.
Statistics are the liers of first order.
Statistics can prove or disprove
anything.
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Measure of Central Tendency
It is a single value represent the entire
mass of data. Generally, these are the
central part of the distribution.
It facilitates comparison & decision-
making
There are mainly three type of measure
1. Arithmetic mean
2. Median
3. Mode
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Arithmetic Mean
This single representative value can be
determined by:
A.M. =Sum/No. of observations
Properties:
1. The sum of the deviations from AM is always
zero.
2. If every value of the variable increased or
decreased by a constant then new AM will
also change in same ratio.
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Arithmetic Mean (contd..)
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Median
The median is that value of the
variable which divides the group into
two equal parts, one part comprising
all values greater, and the other part
having lesser value than median.
Determination of Median
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Mode
Mode is that value which occurs most
often in the series.
It is the value around which, the
items tends to be heavily
concentrated.
It is important average when we talk
about “most common size of shoe or
shirt”.
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Relationship among Mean, Median
& Mode
For a symmetric distribution:
Mode = Median = Mean
The empirical relationship between mean,
median and mode for asymmetric
distribution is:
Mode = 3 Median – 2 Mean
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Skewness
Mode: Peak of the curve.
Median: Divide the curve into two equal
parts.
Mean: Center of gravity of the curve.
For a positively skewed distribution:
Mean>Median>Mode
For a Negatively skewed distribution:
Mean<Median<Mode
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Dispersion or Variation
The average does not enable us to
draw a full picture of the distribution.
So a further description is necessary
to get a better description.
The extent or degree to which data
tends to spread around an average is
called dispersion & Variation.
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Objectives
For judging the reliability of averages.
Comparison of distributions
Useful for controlling variability
Useful in further analysis
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Measure of Dispersion
Range
Inter quartile Range
Mean Deviation
Standard Deviation
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Range
Range is the difference between the
largest and the smallest observation.
Range = L-S
It is easy to calculate and provides a
full picture of variation of the data
quickly.
It is crude measure & not based on all
the observations.
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Correlation Analysis
Correlation denotes the degree of
interdependence between variables or
the tendency of simultaneous variation
between variables.
Types of Correlation:
1. Positive & Negative
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Positive & Negative Correlation
Positive Negative
Income Vs Price Vs
Expenditure Consumption
Agricultural Prod Day temp Vs Sale
Vs Rainfall of Woolen clothes
Sales Vs Advt Expd
Cost of raw
material Vs Cost of
Industrial Prod
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Measure of Correlation
Scatter Diagram Method
Karl Pearson’s Coefficient of
Correlation
Spearman’s Coefficient of Rank
Correlation
Concurrent Deviation Method
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Scatter Diagram Method
It is a graphical method to find the
correlation between variables.
Here the pair of the observations are
plotted on a 2-D space.
After joining the these points we can
have the idea about the relationship
between variables.
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Karl-Pearson’s coefficient of
correlation (r)
The value of r lying between -1 and
+1 i.e., -1≤r ≤+1
Coefficient of correlation is
independent of change origin and
scale.
Coefficient ‘r’ is symmetric rxy=ryx
The Probable error of ‘r’ is used to
interpreting its estimated value.
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Spearman’s Coefficient of Rank
Correlation
Karl-Pearson’s method discusses the
relationship between the quantitative
variable where as Spearman’s
coefficient suitable for qualitative
variable like, rank given to the
participant in any contest by two
judges and we want to measure the
relationship between rank given by
these judges.
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Concurrent Deviation Method
This is the simplest method in which
only the direction of change is taken
into consideration rather than
magnitude of variation.
It gives a general idea about the
correlation between variables quickly.
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Regression Analysis
It is concerned with the formulation
and determination of algebraic
expression for the relationship
between variables.
For this purpose we use regression
lines.
These regression line are used for
predicting the value of one variable
from that of other.
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Regression Analysis contd..
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Properties of Regression Lines &
Coefficient
The regression line Y on X is used to
estimate the best value of Y (Dep.)
for a given value of X (Indep.).
The regression line X on Y is used to
estimate the best value of X (Dep.)
for a given value of Y (Indep.).
Both the regression coefficients are
independent of change of origin &
scale.
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Properties of Regression Lines &
Coefficient (contd..)
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Standard Error of Estimate
It provides us a measure of scatter of
the observations about an average
line, the standard error of estimate of
Y on X is:
SY.X = √ [Σ(Y-Yest)2 / N]
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Probability
Probability is a concept which
numerically measures the degree of
uncertainty or certainty of the
occurrence of any event. i.e. the
chance of occurrence of any event.
The probability of an event A is
No. of Favorable cases
P(A)= Total No. of Cases
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Probability
If P(A)=0, Impossible Event
If P(A)=1, Sure Event
0≤P(A)≤1
P(A)= Probability of occurrence
P(Ā)= Probability of Non-occurrence
P(A) + P(Ā) = 1
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Some Keywords
Equally Likely Events: When the
chance of occurrence of all the events
are same in an experiment.
Mutually Exclusive Events: If the
occurrence of any one of them
prevents the occurrence of other in
the same experiment.
Sample Space: the set of all possible
outcomes.
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Some Keywords
Independent Events: If two or more
events occur in such a way that the
occurrence of one does not effect the
occurrence of other.
Dependent Events: If the occurrence
of one event influences the
occurrence of the other.
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Classical or Priori Probability
If a trial result in ‘n’ exhaustive,
mutually exclusive and equally likely
cases and ‘m’ of them are favorable
to the happenings of an event E, then
the probability ‘P’ of happening of E is
given by:
P(E) = m / n
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Empirical or Posteriori Probability
The classical def requires that ‘n’ is
finite and that all cases are equally
likely.
This condition is very restrictive and
can not cover all situations.
The above conditions are not
necessarily active in this case.
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Fundamental rule of counting
If an event can occur in ‘m’ ways and
following it, a second event can occur
in ‘n’ ways, then these two event in
succession can occur in ‘mxn’ ways.
E.g. A tricolor can be formed out of 6
colors in 6x5x4=120 ways.
No. of words of 3 characters out of 26
alphabets 26x25x24= 15600 ways.
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Permutations
The different arrangement can be
made out of a given no. of things by
taking some or all at a time are called
permutations.
P (n,r) = n! / (n-r)!
E.g. permutations made with letters
a,b,c by taking two at a time:
P(3,2)=6
ab, ba, ac, ca, bc, cb
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Combinations
The combination of ‘n’ different
objects taken ‘r’ at a time is a
selection of ‘r’ out of ‘n’ objects with
no attention given to order of
arrangement
C (n,r) = n!/r!(n-r)!
e.g. From 5 boys & 6 girls a group of 3
is to be formed having 2 boys & 1 girl
is C(5,2) x C(6,1) = 60 ways
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Example
A coin is tossed three times. Find the
probability of getting:
i) Exactly one head
ii) Exactly two head
iii) One or two head
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Example
One card is randomly drawn from a pack
of 52 cards. Find the probability that
i) Drawn card is red
ii) Drawn card is an ace
iii) Drawn card is red and king
iv) Drawn card is red or king
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Example
A bag contains 3 red, 6 white and 7
blue balls. Two balls are drawn at
random. Find the probability that
i) Both the balls are white.
ii) Both the balls are blue.
iii) One ball is red & other is white.
iv) One ball is white & other is blue.
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Addition Theorem
For any two event A and B the
probability for the occurrence of A or
B is given by:
P(AUB)= P(A) + P(B) – P(AПB)
If A & B are mutually Exclusive then
P(AПB)=0
P(AUB)= P(A) + P(B)
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Multiplication or Conditional
Probability
The probability of an event B when it
is known that the event A has
occurred already:
P(B/A)= P(AПB) / P(A) ;if P(A)>0
ie. P(AПB)= P(A).P(B/A)
If A and B are Independent event:
P(AПB)= P(A).P(B)
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Example
A bag contains 25 balls numbered from 1
to 25. Two balls are drawn at random from
the bag with replacement. Find the
probability of selecting:
i) Both odd numbers.
ii) One odd & one even.
iii) At least one odd.
iv) No odd numbers.
v) Both even numbers.
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Example
Five men in a company of 20 are
graduate. If 3 men are picked up at
random, what is the probability that
they are all graduate? What is the
probability that at least one is
graduate.
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Example
The probability that A hits a target is
1/3 and the probability that B hits the
target is 2/5. What is the probability
that the target will be hit, if each one
of A and B shoots at the target.
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Expected Value of Probability
Let X be the random variable with the
following distribution:
X : x1 x2 x3………..
P(X) :P(x1) P(x2) P(x3)……..
Expected Value is given by:
E(X) = Σ xi . P (xi)
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Example
A player tossed two coins. If two
heads show he wins Rs. 4. if one
head shows he wins Rs. 2, but if two
tails show he pays Rs. 3 as penalty.
Calculate the expected value of the
game to him.
Solution:
E(X)= (-3) ¼ + (2) ½ + (4) ¼ =1.25
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Example
An insurance company sells a
particular life insurance policy with a
face value of Rs. 1000 and a yearly
premium of Rs. 20. If 0.2% of the
policy holder can be expected to die
in the course of a year, what would
be the company’s expected earning
per policy holder per year.
E(X)= (-980) 0.002 + (20) 0.998=18
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Theoretical Probability Distribution
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