Review of Basic Statistics: "There Are Three Kinds of Lies: Lies, Damned Lies, and Statistics." (B.D. Israeli)

Review of Basic
Statistics
“There are three kinds of lies:
lies, damned lies, and
statistics.”
(B.D. Israeli)
Why study statistics?
Data are everywhere Statistical techniques are

used to make many decisions
that affect our lives
No matter what your career, you will make professional decisions
that involve data. An understanding of statistical methods will help
you make these decisions efectively
Applications of
statistical concepts in
the business world
Finance – correlation and
regression, index numbers, time
series analysis
Marketing – hypothesis testing,

chi-square tests, nonparametric
statistics
Applications of
statistical concepts in
the business world
Human Resource– hypothesis testing,

chi-square tests, nonparametric tests
Operating management – hypothesis

testing, estimation, analysis of
variance, time series analysis
Statistics is the process/ science of…
of
data
collecting
interpreting
presenting organizing
Types of statistics
Descriptive statistics – Methods of organizing,
summarizing, and presenting data in an informative
way
Inferential statistics – The methods used to
determine something about a population on the basis
of a sample
◦ Population –The entire set of individuals or objects of interest
or the measurements obtained from all individuals or objects of
interest
◦ Sample – A portion, or part, of the population of interest
Population vs.
Sample
Inferential
Statistics
Estimation
◦ e.g., Estimate the population mean
weight using the sample mean
weight
Hypothesis testing
◦ e.g., Test the claim that the
population mean weight is 70 kg
Inference is the process of drawing

conclusions or making decisions
about a population based on sample
results
Sampling
a sample should have the same characteristics
as the population it is representing.
Sampling can be:
•with replacement: a member of the population may
be chosen more than once (picking the candy from the
bowl)
• without replacement: a member of the population
may be chosen only once (lottery ticket)
Sampling methods
Sampling methods can be:
random (each member of the population has an equal
chance of being selected)
nonrandom
The actual process of sampling causes sampling errors.

For example, the sample may not be large enough or
representative of the population. Factors not related to the
sampling process cause no sampling errors. A defective
counting device can cause a no sampling error.
Random sampling
methods
simple random sample (each sample of the same size
has an equal chance of being selected)
stratified sample (divide the population into groups
called strata and then take a sample from each stratum)
cluster sample (divide the population into strata and
then randomly select some of the strata. All the
members from these strata are in the cluster sample.)
systematic sample (randomly select a starting point
and take every n-th piece of data from a listing of the
population)
Descriptive Statistics
Collect data
◦ e.g., Survey
Present data
◦ e.g., Tables and graphs
Summarize data
X i
◦ e.g., Sample mean = n
Statistical data
 The collection of data that are relevant to
the problem being studied is commonly the
most difficult, expensive, and time-
consuming part of the entire research
project.
 Statistical data are usually obtained by
counting or measuring items.
 Primary data are collected specifically for the
analysis desired
 Secondary data have already been compiled
and are available for statistical analysis
 A variable is an item of interest that can
take on many different numerical values.
 A constant has a fixed numerical value.
Data
Statistical data are usually obtained by
counting or measuring items. Most data
can be put into the following categories:
Qualitative - data are measurements
that each fail into one of several
categories. (hair color, ethnic groups and
other attributes of the population)
quantitative - data are observations that
are measured on a numerical scale
(distance traveled to college, number of
children in a family, etc.)
Qualitative data
Qualitative data are generally described by
words or letters. They are not as widely used as
quantitative data because many numerical
techniques do not apply to the qualitative data.
For example, it does not make sense to find an
average hair color or blood type. Qualitative
data can be separated into two subgroups:
dichotomic (if it takes the form of a word with
two options (gender - male or female)
polynomic (if it takes the form of a word with
more than two options (education - primary
school, secondary school and university).
Quantitative data
Quantitative data are always numbers and
are the result of counting or measuring
attributes of a population. Quantitative
data can be separated into two subgroups:
discrete (if it is the result of counting (the

number of students of a given ethnic group
in a class, the number of books on a
shelf, ...)
continuous (if it is the result of measuring

(distance traveled, weight of luggage, …)
Determine whether the following
Let’s Have Some data are discrete or continuous.
Fun!
Number of
languages a Number of people
Time to wake up sleeping in stats
person speaks
in the morning class
Height
of
children
Weight of cars
Number of children in a
household Speed of the train
Types of variables
Variables
Qualitative Quantitative
Dichotomic Polynomic Discrete Continuous
Amount of income tax

Gender, marital Children in family,
Brand of Pc, hair color paid, weight of a
status Strokes on a golf hole
student
Numerical scale of
measurement:
Nominal – consist of categories in each of which the number of
respective observations is recorded. The categories are in no logical
order and have no particular relationship. The categories are said to be
mutually exclusive since an individual, object, or measurement can be
included in only one of them.
Ordinal – contain more information. Consists of distinct categories in
which order is implied. Values in one category are larger or smaller than
values in other categories (e.g. rating-excelent, good, fair, poor)
Interval – is a set of numerical measurements in which the distance
between numbers is of a known, sonstant size.
Ratio – consists of numerical measurements where the distance
between numbers is of a known, constant size, in addition, there is a
nonarbitrary zero point.
Levels of measurement
Question 1
Age in years?
Ratio and discrete
Is the following statement valid?

◦ A person who is 44 years old is twice as old as someone
who is 22 years old
Valid – ratio level measures allow us to identify the
magnitude of differences
Question 2
Temperature in Celsius?
Interval and continuous

◦ Liquid that is 3°C is three times as hot as the same liquid at 1°C
Not valid – interval level measures tell us how much

more (2°C in this case) but not magnitude
Question 3
Religion?
Nominal
Why?
Nominal level measures have no ordering
What is wrong with these categories for measuring
religion?
◦ Catholic
◦ Anglican
◦ Hindu
◦ Buddhist
Question 4
Exam grades i.e. A, B, C etc
Ordinal
◦ A student who got a ‘B’ got a higher grade than a student who
got a ‘C’
Valid – but with ordinal level measures we don’t know
by how much higher
Question 5
You measure the waist (in cm) of a number of patients. This would be an
example of measurement at the:
A. nominal level.
B. ordinal level.
C. interval level.
D. ratio level.
Question 6
What level of measurement would be involved in recording a person's
national insurance number?
A. nominal level
B. ordinal level
C. interval level
D. ratio level
Question 7
A variable that can only take certain values (like whole numbers) is
referred to as a:
A. continuous variable.
B. discrete variable.
C. constant.
D. statistical variable.
Question 8
Identify the usual level of measurement for each of the following
A. year in school
B. IQ scores
C. life expectancy
D. fatigue
E. cynicism
F. hair colour
G. type of neighbourhood
Data presentation
„ The question is“ said Alice, „whether you can make
words mean so many different things.“
„The question is,“ said Humpty Dumpty, „which is to
be master-that´s all.“ (Lewis Carroll)
Numerical presentation
of qualitative data
pivot table (qualitative dichotomic statistical attributes)
contingency table (qualitative statistical attributes from which at least
one of them is polynomic)
You should know how to convert absolute

values to relative ones (%).
Frequency distributions –
numerical presentation of
quantitative data
Frequency distribution – shows the frequency, or number of
occurences, in each of several categories. Frequency distributions are
used to summarize large volumes of data values.
When the raw data are measured on a qunatitative scale, either
interval or ration, categories or classes must be designed for the data
values before a frequency distribution can be formulated.
Steps for constructing a
frequency distribution
m n
1. Determine the number of classes
h
 max  min 
2. Determine the size of each class m
3. Determine the starting point for the first class
4. Tally the number of values that occur in each class
5. Prepare a table of the distribution using actual counts and/ or
percentages (relative frequencies)
Frequency table
absolute frequency “ni” (Data TabData AnalysisHistogram)
relative frequency “fi”
Cumulative frequency distribution shows the total number of
occurrences that lie above or below certain key values.
cumulative frequency “Ni”
cumulative relative frequency “Fi”
Charts and graphs
Frequency distributions are good ways to present the essential aspects
of data collections in concise and understable terms
Pictures are always more effective in displaying large data collections
Histogram
Frequently used to graphically present interval and ratio data
Is often used for interval and ratio data
The adjacent bars indicate that a numerical range is being summarized
by indicating the frequencies in arbitrarily chosen classes
Frequency polygon
Another common method for graphically presenting interval and ratio
data
To construct a frequency polygon mark the frequencies on the vertical
axis and the values of the variable being measured on the horizontal
axis, as with the histogram.
If the purpose of presenting is comparation with other distributions, the
frequency polygon provides a good summary of the data
Ogive
A graph of a cumulative frequency distribution
Ogive is used when one wants to determine how many observations lie
above or below a certain value in a distribution.
First cumulative frequency distribution is constructed
Cumulative frequencies are plotted at the upper class limit of each
category
Ogive can also be constructed for a relative frequency distribution.
Pie Chart
The pie chart is an effective way of displaying the percentage
breakdown of data by category.
Useful if the relative sizes of the data components are to be
emphasized
Pie charts also provide an effective way of presenting ratio- or interval-
scaled data after they have been organized into categories
Pie Chart
Bar chart
Another common method for graphically presenting nominal and
ordinal scaled data
One bar is used to represent the frequency for each category
The bars are usually positioned vertically with their bases located on
the horizontal axis of the graph
The bars are separated, and this is why such a graph is frequently used
for nominal and ordinal data – the separation emphasize the plotting of
frequencies for distinct categories
Time Series Graph
The time series graph is a graph of data
that have been measured over time.
The horizontal axis of this graph
represents time periods and the vertical
axis shows the numerical values
corresponding to these time periods

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Review of Basic

Data are everywhere Statistical techniques are

Marketing – hypothesis testing,

Human Resource– hypothesis testing,

Operating management – hypothesis

Inference is the process of drawing

The actual process of sampling causes sampling errors.

discrete (if it is the result of counting (the

continuous (if it is the result of measuring

Dichotomic Polynomic Discrete Continuous

Amount of income tax

Is the following statement valid?

Is the following statement valid?

Not valid – interval level measures tell us how much

You should know how to convert absolute

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