CHAPTER ONE

STATISTICS REFRESHER
 Introduction
Definition
Statistics: is a discipline which involves collecting, summarizing,
analyzing and presenting numerical data in a convenient form.
Is a discipline that involves extracting useful information from
numerical data.
Is presenting data to useful form from numerical data.
Importance (uses) of statistics
• Accounting
 Public accounting firms use statistical sampling procedures
when conducting audits for their clients.
• Finance
 Financial analysts use a variety of statistical information,
including price-earnings ratios and dividend yields, to guide
their investment recommendations.
 Areas (Types of Statistics)
Two general types of statistics:
1. Descriptive statistics: statistics that summarize
observations.
Are procedures used to summarize, organize, and make
sense of a set of scores or observations.
Typically presented graphically, in tabular form (in tables),
or as summary statistics (single values).
 A descriptive value for a population is called a parameter
and a descriptive value for a sample is called a statistic.
 It involves processing (numerical) in convenient form. .
 Explaining the reality
 E.g. computing the average sum of test
3
2. Inferential statistics
It involves making judgment, inference, generalizations,
estimates etc. about a larger population using the information
that is obtained from the sample.
Measurements of population are called parameters.
Studying about the population is called census.
Studying about sample is called sampling.
While descriptive statistics describe the characteristics of the
observed data and helps to reach conclusion about some
group only, inferential statistics provides methods for making
generalization about the whole population based on the
sample of observed data.
statistics used to interpret the meaning of descriptive
statistics.
 STATISTICAL INFERENCE
It is the process of making statements, forecasts,
prediction, and generalizations about a population
using information obtained from the sample.
Its primary purpose of statistics because
 The population is usually large (infinite).
 Conducting census is too costly or impractical.
 Statistical data
Meaning
Data are facts/figures/values that variables will
assume.
Data are raw facts that will be used to draw a
conclusion or make a decision.
Data are the facts and figures that are collected,
summarized, analyzed, and interpreted.
E.g. ABC’s sales revenue is $100 bn.; stock/share price $80.
The data collected in a particular study are referred to
as the data set.
E.g. The sales revenue and stock price data for a number
of firms
 Data Sources

Primary Secondary
Data Collection Data Compilation

Print or Electronic
Observation Survey

Experimentation
 Types of Data

D a ta

C a t e g o r ic a l N u m e r ic a l
( Q u a l it a t iv e ) (Q u a n tit a tiv e )

D is c r e te C o n t in u o u s
 Qualitative Data
 Qualitative data are labels or names used to identify an attribute of
each element..
 Qualitative data can be either numeric or nonnumeric.
 Qualitative data can use either the nominal or ordinal scale of
measurement
1. Nominal (nominative): there is no meaningful ordering, or
ranking of the categories. Example: a person’s gender, the color
of a car, and an employee’s state of residence. It simply assigns
values.
2. Ordinal: There is a meaningful ordering, or ranking of the
categories. The measurements may be nonnumeric or
numerical. Example: a student may be asked to rate the teaching
effectiveness of a college instructor as
i. Excellent, Very good, Good, Poor, unsatisfactory
ii. 1,2,3,4,5
 Quantitative Data
Quantitative data indicate either how many or how much.
Quantitative data that measure how many are discrete.
Quantitative data that measure how much are continuous because there is
no separation between the possible values for the data.
Quantitative data are always numeric.
Ordinary arithmetic operations (e.g., +, -) are meaningful only with
quantitative data.
Quantitative data can use either the interval or ratio (rates) scale of
measurement
1. Interval: the ratios of its values are not meaningful and there is not an
inherently defined zero value. Example: Temperature (on the Fahrenheit
scale) is an interval variable. Zero degrees Fahrenheit does not represent
“no heat at all”. In practice there are very few interval variables other than
temperature. Almost all variables are ratio variables.
2. Ratio (rates):it measures on a scale such that ratios of its values are
meaningful and there is an inherently defined zero value. Example:
salary, weight, height, time, distance
 Organization of descriptive data
Tabular Methods of Data Presentation
 Tabulation is the arrangement of information or data in tables.
 There are various techniques of tabulation.
A) Data Array
 Is a table showing data arranged in descending or ascending order.
Descending: (100, 99, 98, 97 ……..)
Ascending: (1, 2, 3,4,5,6,7,8,9 …………)
 Data array offers a number of advantages:
 Determine at a glance the highest & lowest values
contained in the data.
 Identify groups of similar data values.
 Easily see differences b/n values in the data.
B) Frequency Distribution
 Is a table that group data into non-overlapping intervals called
classes & records the number of observations in each class.
 Summarizes data in a condensed form that can be readily
understood & easily interpreted.
Key Terms in frequency distribution
Class: Each category of the frequency distribution.
Frequency: The number of data values falling within each class.
Total frequency: The sum of class frequencies.
Class Limits: The boundaries for each class (upper/lower limits)
Class Boundaries: Limits which are determined mathematically so
that no gap exists b/n classes. Also called true class limits.
Class Interval: The width of each class = The difference b/n lower
limit/upper limit of the class & lower limit/upper limit of the next
higher class.
 range
Approximate class width 
number of classes desired
Range  Maximum value - minimum value
Class Mark: The midpoint of each class = The midway b/n
upper & lower class limits.

13
 Guidelines for frequency distribution
a) The set of classes must be mutually exclusive.
- A given data value should fall into only one class/category.
- No overlap b/n classes.
- Limits such as the following would be inappropriate:
Class frequency Clas frequency
15-20 4 17.0-23.5 5
20-25 5 22.0-28.5 10

b) The class must be exhaustive.

- No data value should fall outside the range covered by the
frequency distribution. 14
c) If possible, the classes should have equal widths.
 Unequal class widths - difficult to interpret both freq distribution &
their graphical presentation.
 One exception occurs w/n there is an open-ended distribution, i.e., it
has no specific beginning value or no specific ending value.
Example: class
< 10 (meaning that any value below 10 will be tallied in this class)
10 - 20
21 – 31
32 – 42
43 – 53
54 – 64
>65 (means values above 65 will be tallied in the last class)
d) Selecting the number of classes (K):
 It may be a subjective process.
 In general, 5 to 20 classes are recommended.
 We could use scientific methods:
• Sturge’s formula: k =1+3.322log(n) w/re n is the
number of observations.
• 2k rule: select the smallest number (k) for the number of
classes such that 2k is greater than the number of
observations (n).
e) W/n possible, class widths should be rounded numbers
(e.g. 5, 10, 25, 50,100 etc.)
f) If possible, avoid using open – ended classes.
 Types of frequency distributions
There are 3 types of frequency distribution tables.
I. Absolute frequency:
 shows the absolute number of occurrences of an entry or
group of entries in a data set.
II. Relative frequency:
 shows the number of occurrence of each item or class of items in
the data set as a proportion of the total number of observations.
 This can be expressed in decimal, fraction or percentage form.
RF = AF/ TF = AF/n
where n is total number of observations, RF= Relative frequency,
AF = Absolute Frequency, TF = total Frequency=n)
III. Cumulative frequency:
 shows the absolute frequency of occurrence added at each
successive class in the data set.
17
The “less than” and “more than” cumulative frequencies
 The “less than” cumulative frequency of a class is the total
frequency of all values less than the upper boundary of the class.
 The “more than” cumulative frequency of a class is the total
frequency of all values which are greater than the lower
boundary of the class.
Illustrative Example
Given the following data on weekly income of 50
household in Debre Berhan Town, then
a) Find the absolute, relative & cumulative frequencies
after grouping the data;
b) Find the “less than” & “more than” cumulative
frequencies;
c) Interpret the values found at (a) and (b) above. 18
• Data Set
112 100 127 120 134 105 110 118 109 112
110 118 117 116 118 114 114 122 105 109
107 112 114 115 118 118 122 117 106 110
116 108 110 121 113 119 111 120 104 110
120 113 120 117 105 118 112 110 114 114
n = 50
19
 Solution
Steps:
1) Prepare the Data Array
2) Determine the number of classes:

– We could use the Sturge’s formula:

k =1+3.322log50, log 50 = 1.7 = 1+3.322x1.7=1+5.64 = 6.64

=> k is approximately equal to 7.
– Apply the 2k rule:

– In this case, n= 50, 25 = 32, 32 < 50, 26 = 64 > 50,

=> The recommended number of classes is 6.
– Widely used is the Sturge’s formula so that k=7.
3) Determine the class interval /width :
Width = Range/Number of classes
Highest value = 134
Lowest value = 100
=> Range = 134 – 100 = 34, k recommended = 7,
=>
width= =4.9
 Round up to the nearest whole number w/c is 5.
4) Select a starting point for the lowest class limit:
 A starting point can be the smallest data value or any convenient
number less than the smallest data value.
 Let us use 100 (smallest value) as a starting point.
 Add the width to the lowest score taken as the starting point to get
the lower limit of the next class.
 Keep adding until there are 7 classes.
 Subtract one unit from the lower limit of the second class to get the
upper limit of the first class.
 Then, add the width to each upper limit to get all the upper limits.
105 – 1 = 104
1st class = 100 – 104
2nd class = 105 – 109, etc.

22
Class boundaries: can be obtained by subtracting 0.5 from
each lower class limit and adding 0.5 to each upper class limit.
 99.5 – 104.5 = 99.5 ≤ x < 104.5, [99.5, 104.5), half
closed interval.
 104.5 – 109.5 = 104.5 ≤ x< 109.5, [104.5, 109.5)

5) Tally the data:

6) Find the frequency from the tallies:
 The completed frequency distribution is given as:

23
Class Class Upper Absolute Relative Less than Lower More than
Limits boundaries boundaries frequency Frequency frequency boundaries frequency
100-104 99.5-104.5 104.5 2 0.04 2 99.5 50
105-109 104.5-109.5 109.5 8 0.16 10 104.5 48
110-114 109.5-114.5 114.5 18 0.36 28 109.5 40
115-119 114.5-119.5 119.5 13 0.26 41 114.5 22
120-124 119.5-124.5 124.5 7 0.14 48 119.5 9
125-129 124.5-129.5 129.5 1 0.02 49 124.5 2
130-134 129.5-134.5 134.5 1 0.02 50 129.5 1
Total 50 1

Note that the sum of the relative frequencies is always 1

or 100%.
7) Interpretation:
 31 (18+13) of the households earn a monthly income from birr
110 – 119
 62% of the households earn a monthly income from birr 110 –
119 (31/50*100%)
 28 of the households earn a monthly income less than birr
114.5
 40 of the households earn a monthly income at least birr 109.5
Note: The reasons for constructing a frequency distribution
are:
– To organize the data in a meaningful way
– To enable researchers to draw charts and graphs for the presentation
of data.
– To enable a reader to make comparisons among different data sets.
Graphic Methods of Data Presentation
 One can easily present data in graphic form once a frequency
distribution is organized.
Graphs are used to:-
 Convey the data to the viewers in pictorial /graphic form,
 Get the audiences’ attention in a publication or a speaking
presentation,
 Discuss an issue, reinforce a critical point, or summarize a data set,
 Make more understandable than data presented in tables and
frequency distribution,
 Discover a trend or pattern in a situation over a period of time.
The most commonly used types of graphs in research are:-
a) Histogram
b) Frequency polygon
c) Cumulative frequency graph or O-give 26
a) Histogram:
 Is a graph that displays the data by using adjacent vertical
rectangles of various heights to represent the frequencies
of the classes.
 In a histogram the class boundaries are marked on the
horizontal axis and the class frequencies (absolute or
relative) on the vertical axis.
 The higher the frequency of a class, the taller the rectangle
in a histogram associated with the class.
Steps in constructing a histogram:
 Draw x – y axis,
 Label the class boundaries on the x – axis and the frequency on the Y
– axis, and
 Using the frequencies as the heights, draw vertical bars for each class.
Example
 Construct a histogram given the following frequency
distribution
 Note the three steps of constructing a histogram.
Class Absolute
boundaries frequency
99.5-104.5 2
104.5-109.5 8
109.5-114.5 18
114.5-119.5 13
119.5-124.5 7
124.5-129.5 1
129.5-134.5 1
Total 50
 Histogram

99.5-104.5 104.5-109.5

18
16
14 109-114.5 114.5-119.5
Frequency

12
10
8
6 119.5-124.5 124.5-129.5
4
2
0
Classes in order 129.5-134.5

 The class with the greatest number of data values/frequency (18) is

109.5 – 114.5
 The same conclusions and the shape of the histogram would have
been the same had we used a relative frequency distribution instead
of the absolute (actual) frequencies. 29
b) Frequency Polygon
 Consists of line segments connecting the points formed by
the intersection of the class marks with the class
frequencies.
 Relative frequencies may also be used in constructing the
figure.
 Empty classes are included at each end so the curve will
intersect the X – axis.
Steps in constructing a frequency polygon:
 Find class marks for each class,
 Draw the x – y axis. Label the x – axis with the class marks
and use a suitable scale on the y – axis for the frequencies
(absolute or relative), and
 Connect the coordinated (x, y) with line segments.
Example: Using the frequency distribution given in the
previous example, construct a frequency polygon.
Step 1: Find class marks
Class boundaries Class mark Frequency
99.5 - 104.5 102 2
104.5 - 109.5 107 8
109.5 - 114.5 112 18
114.5 - 119.5 117 13
119.5 - 124.5 122 7
124.5 - 129.5 127 1
129.5 - 134.5 132 1
Steps 2 & 3:
frequency polygon

20
18
18

16

14 13
12
Frequency
Frequency
10
8
8 7
6

4
2
2 1 1
0 0
0
107

117

122

127

132

137
97

102

112

Class Marks
c) Cumulative frequency graph ( o-give):
 The o-give is a graph that displays cumulative values for
frequencies, relative frequencies or percentages.
 These values can be either “more than” or “ Less than”.
Steps in constructing cumulative frequency graph
Find the cumulative frequency for each class,
Draw the x–y axis and label the x–axis with the class
boundaries and y–axis with the cumulative
frequencies, and
Plot the cumulative frequency at each upper class
boundary. Upper class boundaries are used since the
cumulative frequencies represent the number of data
values accumulated up to the upper boundary of each
class.
Example: construct an o-give for the frequency distribution
given in the previous example.
Step 1: Calculate cumulative frequency for each class
Less than
cumulative
Class boundaries frequency found by
99.5 - 104.5 2 2+0
104.5 - 109.5 10 2+8
109.5 - 114.5 28 2+8+18
114.5 - 119.5 41 2+8+18+13
119.5 - 124.5 48 2+8+18+13+7
124.5 - 129.5 49 2+8+18+13+7+1
129.5 - 134.5 50 2+8+18+3+7+1+1
Steps 2 & 3

 Cumulative frequency graphs (less than cumulative frequency)

are used to visually represent how many values are below a
certain upper class boundary.
 Other Methods of data presentation
A. Line graphs
B. Bar charts
C. Pie – charts
A) Line graphs (charts): Line charts are particularly
effective for business and economic data because we can
show the change or trends in a variable overtime.
 Time series data are most effectively presented on a line chart.
 The variable of interest, such as the number of units sold or the total
values of sales, is scaled along the y – axis and time along the x –
axis.
 NB: Two or more series of data can be plotted on the same line chart.
Thus a chart can show the trend of several different variables and this
allows for a comparison of several series over the same period of
time.
B) Bar Charts:
This is used when the horizontal axis deals with
information that is qualitative or non – continuous in
nature, e.g. Gender, Marital status, etc.
When we represent data using bar charts, the bars
are not joined together. All the bars must have equal
width and the distance between bars must be equal.
C) Pie – Chart:
 is useful for displaying a relative frequency distribution.
A circle is divided proportionally to the relative
frequency and portions of the circle are allocated for
the different groups.
 Measures of Central Tendency (location)

A Measure of Central Tendency: A typical value that describes a data set.

Measures of central tendency describe a data set near its center.

They provide indications on middle values or most likely or most frequent values.

In other words, they tell us where the center of the distribution of the data is located.
Types of measures of central tendency
1. Arithmetic Mean
2. Weighted mean
3. Geometric mean
4. Harmonic Mean
5. Median (MD)
6. Mode (MO)
1. Arithmetic Mean: The arithmetic mean is the sum of the
data set values divided by the number of observations.
Arithmetic mean or average value of a variable is
the most important numerical measures of central
tendency
For ungrouped data, the population mean (usually
denoted by “”) is the sum of all the population
values divided by the total number of population
values:
N

X i
 i 1

N
where : N  number of elements in the population
  population mean
 For ungrouped data, the sample mean is the sum of all the
sample values divided by the number of sample values:
n

X i
X  i 1

n
X  sample mean
n  number of elements in the sample/sam ple size
 A sample of five executives received the following salaries
(Birr in thousands): 14.0, 15.0, 17.0, 16.0, and 15.0, find the
mean salary.
 Therefore, the mean salary of the executives is Birr
15,400.00
Xi 14.0  ...  15.0 77
X    15.4
n 5 5
Properties of Arithmetic mean
1. Arithmetic mean is the most widely used measure of
location/central tendency.
2. All the values are included in computing the mean.
3. A set of data has a unique mean.
4. Every set of quantitative data has a mean.
5. The mean is affected by large or small data values, called
outliers and may not be the appropriate average to use in
this situations.
6. We cannot determine a mean for open ended data.
7. The sum of the deviations of each value from the mean is
always zero.
 Arithmetic mean for grouped data
The mean of a sample of data organized in a
frequency distribution is computed by the following
formula:
k

fX i i
fi  i th class frequency
X  i 1
k
where: X i  class mark of the i th class
f i 1
i k  number of classes
Example: Compute the arithmetic mean for the
following grouped data:
Class Boundaries Class mark fi fiXi
(Xi)
5.5-10.5 8 1 8
10.5-15.5 13 2 26
15.5-20.5 18 3 54
20.5-25.5 23 5 115
25.5-30.5 28 4 112
30.5-35.5 33 3 99
35.5-40.5 38 2 76
7 7
490
i1 f i  20 i1 f i X i  490  X  20  24.5
2. Weighted Mean: It is a special case of arithmetic mean.
 It is the mean value of data values that have been weighted
according to their relative importance.
 The formula for the weighted mean of a population or a
sample will be as follows:

  or X  ixi

 i
Where:   is population weighted mean

X =is sample weighted mean

i  Weight assigned to the ith data value
xi  The ith data value
Examples:
I. During a one hour period on Saturday afternoon a waiter served 50
drinks. She sold 5 drinks for birr 0.50, 15 for birr 0.75, 15 for birr
0.90, and 15 for birr 1.10. Compute the weighted mean price of the
soft drinks.
5 * 0. 50  15( 0. 75  0. 90  1. 10 )  0.875
X
50
II. A student scored an A in Sophomore English (3 credit hours), a C
in Psychology (3 credit hours), a B in Principles of Accounting-I (4
credit hours) and a D in Civics (2 credit hours). Assuming A has 4
grade points, B has 3 grade points , C has 2 grade points and D has
1 grade points, calculate the grade point average (GPA).
Answer =32/12=2.66=B
3. Geometric Mean: The geometric mean (GM) of “n”
positive numbers is defined as the nth root of their product.
The formula is:

GM = n  X 1 X 2  X 3.... Xn   n xi ,  => multiplication

The geometric mean is useful in finding the average of
percents, ratios, indexes, or growth rates.
It has a wide application in business and economics because
we are often interested in finding the percentage changes in
sales, revenues, profits, GDP, etc.
• Examples:
a) The GM of 4 and 16 is 4 * 16  8

b) The GM of 1,3,9 is 3
1* 3 * 9  3

c) The interest rates on three bonds were 5, 21, and 4

percent. The average interest rate is: GM  3
5  21  4  7.49

d) The returns on investment earned by a company for four

successive years were 30%, 20%, -40% & 200%, what
is the geometric rate of return on investment?
Solution: 30% return means additional gain from what
we have (i.e. from 100%). Then 30% return is
expressed as 1.3, -40% implies reduction ( 1-0.4 = 0.6)
GM  4 (1.3) * (1.2) * (0.6) * (3.0 ) =1.294. The GM of the return
is therefore 1.294-1= 29.4%
 Another use of the geometric mean is to determine the
percent increase in sales, production or other business or
economic series from one time period to another.
GM  n
 value at end of period   1, n= time gap/time period
 value at beginning of period 
Example:
i) The production of soaps for a soap factory increased from
755,000 in 1992 to 835,000 in 2000. What would be the
rate of production increase per year?

Solution:  GM  8
835, 000
 1  1.27%
755,000
ii) If a person receives a 20% rise in his initial income after one
year of service and a 10% rise after the second year of
service, What is the average percentage increase?
20%  10%
The average percentage raise is not 15% ( ) but 14.89% as shown below:
2

GM  1.2 * 1.1  1.1489 or

GM  120 *110  114 .89%

Let’s show this answer by assuming that the person earns Birr 10,000 at the
beginning and receives two raises of 20% and 10%.
Raise 1=10,000*20%=Birr 2000, Raise 2=12,000*10%=1200
The total increase in his salary is Birr 3200. The total is equivalent to:
Birr 10,000*14.89%=Birr 1489
Birr 10,000 +1489=11,489*14.89%=Birr 1710.71
Total increase= Birr 1489 + Birr 1710.71=3199.71 (almost equal to Birr 3200)
iii) The price of a certain commodity in 1970 was 1.06 times
that of 1969, in 1971 it was 1.04 times that of 1970. In the
next two years it was 1.10 and 1.23 times that of the
respective preceding years. What is the average annual
percentage increase in the given period?
GM  4 1.06 * 1.04 * 1.10 * 1.23  1.105  (1.105  1) * 100%  10.5%
(the average annual increase is 10.5%)

Fo r g r o u p e d d a t a g e o m e t r ic m e a n is c a lc ula t e d a s :
f1 f2 fm
GM  x1 * x2 * ...... * xm
n

Where: fi is the frequency of the ith class mark, Xi is class mark, m is number of values, n=total
number of observations.
Example: Find the geometric mean for the following grouped
data on the percentage increase in salary of 16 employees of a
company.
% increase in salary Number of Class mark
employees
0-4 5 2
5-9 6 7
10-14 3 12
15-19 2 17

Solution: GM  16 2 5 * 7 6 * 12 3 * 17 2  5.85% . The geometric mean percentage increase in

salary is 5.85%
4. Harmonic Mean: the harmonic mean of “n” positive
observations is defined as the number of values divided by
the sum of the reciprocals of each value.
n n
HM = 
1 1 1 n
1
  ... 
x1 x2 xn i1 x
i

 It is used for average rates of change. Example: Speed. Example:

Find HM of 60, 50 & 40.
3
HM = = 48.65
1 1 1
 
60 50 40
Example: Suppose a person drives 100kms at 40km/hr and
returned driving at 50km/hr. What is the average speed?

Dis tan ce
Speed 
Time

Dis tan ce S 100km

t1     2.5 hours to make the first trip
Speed V 40km / hr

Dis tan ce S 100km

t2     2 hours to return
Speed V 50km / hr
Total time  2.5 hours  2 hours  4.5 hours
Total distance  100km  100km  200km
S 200km
V   44.44km / hr
t 4.5 hr

2.5 * 40  2 * 50
Arithmetic mean (weighted mean)   44.44km / hr
4.5
This value can be found by using the harmonic mean formula:
2
HM=  44.44km / h
1 1

40 50

 Notice that we don't use the Arithmetic mean find the average speed
because the man traveled equal distances by different speed on the two
trips (they have different weights).
Relationship between Arithmetic mean, Geometric Mean
and Harmonic Mean

• For a set of data containing n-positively valued

observations, the following relationships always holds:
HM≤GM ≤AM
However, HM=GM=AM if all values in the data set
are equal.
5. Median (MD): the median of a set of values arranged in the
order of their magnitudes, i.e., in an array, is the middle
value or the arithmetic mean of two middle values.
 Median is that value of a variable which divides an array of
items in such a manner that the number of items below it is
equal to the number of items above it.
 Median for Ungrouped Data th
 n  1
If the number of observations is odd, then, MD =value of   observatio n
 2 

If the number of observations is even, then, MD =

th th
n n 
  observatio n    1 observatio n
2 2 
2
Example:
1. Find the median of the following data set: 1, 5, 3, 9, 10, 12, 6.
2. Find the median of the following data set: 1, 5, 2, 9, 7, 10, 12, 13.
Answers:[ First construct the data array]
th th
 n 1  7 1 th
MD =   observatio n =   observatio n = 4 observation = 6
 2   2 
th th th th
n n  8 8 
  obsn    1 obsn   obsn    1 obsn
2 2  2 2  4 th obsn  5 th obsn
MD = = =
2 2 2
=8
 Median for Grouped data
For grouped data, median is calculated by using the
following formula:
n 
  cf 
MD  md   2 *i
 f 
 
 

Where : md is the lower class boundary/class limit of the median class, n

is total number of observations, c f is the cumulative frequency

preceding the median class , i is the class interval/width, and f is

frequency of the median class.
Example: Find the median from the following frequency distribution

Class Limit Frequency Cumulative Frequency

30-40 2 2
40-50 18 20
50-60 24 44
60-70 20 64
70-80 8 72
80-90 3 75
total= 75
Solution: Steps
a. Find the cumulative frequency

b. Find f i  n  75  odd
th
 75  1
c. Find the median class:   observatio n  38 th
observatio n
 2 
d. In which class does the 38th observation fall? In the 3rd class and thus the 3rd class is
the median class
e. Find the cumulative frequency preceding the median class. 20 in this case.
f. Find the class width. 10 in this case.
g. Find the frequency of the median class. 24 in this case.
 75 
  20 
MD  50   2  *10  57.29
 24 
 
 
 Properties of Median
I. Array is a must before we calculate the median.
II. There is a unique median for each data set.
III. Geometrically, median divides the histogram or
cumulative frequency curves into two parts with equal
area.
IV. Median remains unaffected by the magnitude of the
extreme values.
6. Mode(MO) :is the most frequent value in a data set.
Example: the examination scores for ten students are:
81,93,84,75,68,87,81,75,81and 87. Because the
score of 81 occurs three times, it is the mode
A data set may have
No mode at all, e.g. 1, 3, 9, 0, 7, 8
One mode (unimodal), e.g. 1, 3, 1, 7, 1, 9, mode is 1
Two modes (bimodal), e.g. 7,2,4,4,7 , the modes are
7 and 4.
Many modes (multimodal), e.g. 1, 0, 0, 1, 3, 2, 2, 3, 7,
7, 4, 9, the modes are 1, 0, 3, 2, 7.
 Mode of a grouped data
• The approximate modal value of a grouped data is
calculated by the following formula:

f  f1 f  f1
Mode  Lo  i  L0  i
 f  f 1  f  f 2  2 f  f 1  f 2

Where:
Lo  lower classs boundary of the modal class (i.e., the class with the highest frequency)
f  is the frequency of the modal class
f1  frequency of the class immediatel y preceding the modal class class
f2  frequency of the class immediatel y following the modal class
i  class interval/w idth
 Example: Find the mode of the following distribution:
Class Limit Frequency
90-100 10
100-110 37
110-120 65
120-130 80
130-140 51
140-150 35
150-160 18
160-170 4

80  65 150
Solution: Mode  120  *10  120   123.41
 2 * 80  65  51 44

•
64
 Properties of mode
I. It is the easiest average to compute.
II. It can be obtained for both qualitative and quantitative
data.
III. It is not affected by extreme values.
IV. The mode may not exist for a data set.
V. It is not unique. A data set can have more than one
mode.
VI. The mode is not based on all observations.
 Distribution, shape and measures of central tendency
 The relative values of the mean, median and mode are very much
dependent on the shape of the distribution for the data they are
describing.
 The data distributions may be described in terms of symmetry and
Skewness.
 In other words, data can be either symmetric or skewed depending on
how the data are distributed around the center.
 Symmetry (normal, bell shaped) distribution: occurs when the data
values are evenly distributed around the center.
 In a symmetrical distribution, the left and right sides of the distribution
are mirror images of each other, and the values of the mean, median and
mode are equal.
 Skewed distribution: occurs when the data values are not evenly
distributed around the center.
 Skewness is lack of symmetry of a distribution.
 Skewness refers to the tendency of the distribution to “tail off” to the
right or left.
Right (positively) skewed distribution: The mean is
greater than the median, which in turn is greater than the
mode.
In such distributions, the median tend to be a better
measure of central tendency than the mean.
MO≤MD≤AM MO<MD<AM
Left (negatively) skewed distribution: the mean is less
than the median, which in turn is less than the mode.
As with the positively skewed distribution, the median is
less influenced by extreme values and tends to be a better
measure of central tendency than the mean.
AM ≤ MD≤ MO AM<MD<MO
 Quartiles, Deciles and Percentiles
 Descriptive measures that describe the position (place) of value in a given
data or distribution are positional averages.
 Measures which divided data in to many equal parts are called quantiles
(fractiles).
 The most important of these are quartiles, deciles and percentiles.
 To obtain such measures, it is mandatory to first order the data in an
increasing order.
Quartiles: divide the data in to four equal parts. The jth quartile denoted as Qj
where j=1, 2, 3 is defined as: th
 j (n  1) 
Qj    observatio n
 4 
 Q1 gives the value where 25% of the observations lie below and 75% above
it.
 Q2 gives the value where 50% of the observations lie below and 50% above
it.
 Q3 gives the value where 75% of the observations lie below and 25% above
it.
Example: Find the quartiles (Q1, Q2, & Q3) from the
following distribution: 8, 4, 8, 3, 4, 8, 5, 5, 10.
Solution: Arrange first: 3,4,4,5,5,8,8,8,10
th
1(9  1) 
Q1    item  ( 2.5) th
item  2 nd
item  0.5(3 rd
item  2 nd
item )  4  0.5 * (4  4)  4
 4 

th
 2(9  1) 
Q2    item  (5) th
item  5
 4 
th
 3(9  1) 
Q3    item  ( 7 . 5) th
item  7 th
item  0 . 5(8 th
item  7 th
item )  8  0.5(8  8)  8
 4 
 Quartiles for grouped data
 The quartiles for grouped data can be calculated as follows:
i*n 
  cf 
 4  *w
Q j  i  i
Where i=1, 2,3
fi
i = lower class boundary of the i th quartile class (the class which contains the
i * n th
( ) item ).
4
w i =class width , f i=frequency of the ith quartile class, n=total number of observations

c f =the cumulative frequency of the class preceding the i th quartile class

Example: Find the quartiles (Q1, Q2, & Q3) from the
following frequency distribution.
Class Boundaries Fi Cf
5.5-10.5 1 1
10.5-15.5 2 3
15.5-20.5 3 6
20.5-25.5 5 11
25.5-30.5 4 15
30.5-35.5 3 18
35.5-40.5 2 20

 Fi is class frequency and Cf is the “less than”

cumulative frequency. 71
 Solution
i*n 
  cf 
4
Q1  1    *w
i
fi

th
n  20 
( ) th item    item  5 th item is Q1 and it falls in the 3 rd class  15.5 - 20.5 is first qua
4 4

 1 * 20 
  3
4
Q1  15.5    * 5  18.83
3
Q2 ?
th
2n  40 
( ) th item    item  10 th item is Q 2 and it falls in the 4 th class  20.5 - 25.5 is seco
4 4

 2 * 20 
  6
4
Q2  20.5    * 5  20.5  4  24.5  median
5
 Q3 ?
th
3n th  60 
( ) item    item  15 th item is Q 3 and it falls in the 5 th class  25.5 - 30.5 is third
4 4

 3 * 20 
  11 
4
Q3  25.5    * 5  25.5  5  30.5
4
Interpretation of Q1, Q2, & Q3 ………..

Deciles: are measures that divide a distribution/data set in to ten equal parts.
 The jth decile for a simple frequency distribution (ungrouped data) denoted as Dj, where j=1,
2, 3.....9 is defined as th
 j (n  1) 
Dj    observatio n
 10 
D1 gives the value where 10% of the observations lie below and 90% above it
D2 gives the value where 20% of the observations lie below and 80% above it
D3 gives the value where 30% of the observations lie below and 70% above it
73
D9 gives the value where 90% of the observations lie below and 100% above it
 Deciles for grouped data
i*n 
  cf 
 10 
D j  i  * wi
fi
Where i=1, 2,3,4.....9
i = lower class boundary of the ith decile class (the class which contains the
i * n th
( ) item ).
10
w i =class width, f i= frequency of the ith decile class, n=total number of observations

c f = the cumulative frequency of the class preceding the ith decile class
 Percentiles
 Percentiles divide a distribution/data set in to 100 equal parts.
– The jth percentile for a simple frequency distribution (ungrouped
data) denoted as Pj, where j=1, 2, 3.....99 is defined as:
th
 j (n  1) 
Pj    observatio n
 100 
P1 gives the value where 1% of the observations lie below and 99%
above it
P2 gives the value where 2% of the observations lie below and 98%
above it
.
.
P99 gives the value where 99% of the observations lie below and 1%
above it
 Percentiles For grouped data
i*n 
  cf 
 100 
Pj  i  * wi
fi
Where i=1, 2,3,4.....99
i = lower class boundary of the ith percentile class (the class which contains the
i * n th
( ) item ).
100
wi =class width
fi=frequency of the ith percentile class
n=total number of observations
cf=the cumulative frequency of the class preceding the i th percentile class
 Measures of Dispersion
Dispersion is the scatter or variation of items from a measure of
central tendency.
It measures the extent to which the values vary among themselves.
Example: Consider the following data on the expenditures of two
groups of workers:
– Group A:ETB Br 6200 2000 1300 1300 1200 (the mean is
ETB 2400)
– Group B: ETB 1600 1700 1300 4200 3200 (the mean is
ETB 2400)
We simply conclude that the two groups spend identical amount, if
we were given only the average expenditure of the two groups
without knowing the actual expenditures.
But the actual observations indicate that more variation is
observed in group A.
 Consequently, there is a need to have a measure of
dispersion to observe variability of data.
 A measure of dispersion may be in an absolute form or
relative form.
 An absolute measure express the magnitude of dispersion in
the same unit of measurement in which the data are
recorded.
 However, a relative measure (w/h is unitless) expresses
dispersion in percentages or ratios. It is a quotient obtained
by dividing the absolute measure by a quantity in respect to
which the absolute dispersion has been computed.
 Qualities of a Good Measure of Dispersion
I. It should be based on all observations
II. It should be easily calculated.
III. It should be easily understandable.
IV. It should be affected as little as possible by sampling
fluctuations.
V. It should be capable of further statistical treatment.
Types of Measures of Dispersion

1. Range

2. Mean Deviation

3. Variance and Standard Deviation

4. Coefficient of Variation
1) Range
 Range is defined as the difference between the smallest and
the largest observations in a given set of raw data.
 Properties of Range:
 Only two values are used in its calculation
 It is influenced by an extreme value (Outliers).
 It is easy to compute and understand.
 It is the crudest measure of dispersion.
 It cannot be determined for an open ended data.
 The grater the range, the higher the variability of the
data and vice versa.
Example: Find the ranges of the following two groups.
– Group A:ETB 6200 2200 1700 1700 1200 (the mean is ETB 2400)
– Group B: ETB 1600 1700 1300 4200 3200 (the mean is ETB 2400)

Solution:
• For Group A :
The highest expenditure = 6200 birr
The lowest expenditure = 1200 birr
Range = highest value – lowest value
= 6200 – 1200 = 5000 Birr
• For Group B :
The highest expenditure = 4200
The lowest expenditure = 1300
Range = 4200 – 1300 = 2900 Birr
• Therefore, in terms of expenditure more variation is observed
in group A.
Note that: For discrete grouped data we use the same
formula as given above, i.e., the difference between the
highest and lowest values.
Example: Compute the range of the following data.
Table: Results (out of 35%) of 20 students in Cost Accounting
test.
Xi 6 24 18 22 30 15
Fi 3 2 5 1 4 5

Maximum value = 30 marks

Minimum value = 6 marks
Range = Highest value – lowest value = 30 – 6 = 24
Three Methods to calculate range for Continuous
Grouped Data:
 Taking the difference between the upper class limit
of the last class and the lower limit of the first class.
 Taking the difference between the upper class
boundary of the last class and the lower class
boundary of the first class.
 Taking the difference between the mid points of the
first and the last class. This does yield a result
closer to the actual range as it reduces the margin
by which it is in error when computed by using the
first the second methods.
Example: Compute the range of the data given below in table
Table :Results (out of 35%) of 40 students in Econometrics test
Score (35%) Class Boundary Number of Students (Fi)
6 – 10 5.5 – 10.5 5
11 – 15 10.5 – 15.5 10
16 – 20 15.5 – 20.5 15
21 – 25 20.5 – 25.5 7
26 – 30 25.5 – 30.5 3
Solution
– Range = UCBL – LCBF = 30.5 – 5.5 = 25 or
– Range = UCLL – LCLF= 30 – 6= 24 or
– Range = 28 – 8 = 20 [ Using the mid-points]
• The relative range or coefficient of range is defined as follows:
– For raw data & discrete grouped data
Range Highestval ue  LowestValu e
x100%  x100%
Sumofexter emevalue Highestval ue  Losestvalu e

– For continuous grouped data

UCBL  LCBF
x100%
UCB L  LCB F

Example: Compute the coefficient of range for the following raw

data.
2, 4, 6, 8, 16, 18, 20
Answer: 81.8%
• Example: Find the coefficient of range (relative range) for the
data given in the following table.
Score (35%) Class Boundary Number of Students (Fi)
6 – 10 5.5 – 10.5 5
11 – 15 10.5 – 15.5 10
16 – 20 15.5 – 20.5 15
21 – 25 20.5 – 25.5 7
26 – 30 25.5 – 30.5 3

• Solution:-
UCBL = 30.5, LCBF = 5.5.
30.5  5.5
X 100%
Coefficient of range = 30.5  5.5 = 69.4%

86
 Points to note:
1. Range is as good a measure of dispersion as any other
where the data consist of a few observations.
2. It is advantageous when one wants to know only the
extent of the extreme dispersion under “ordinary”
conditions.
3. It tells us noting about the dispersion of the values which
fall between the two extremes.
4. It is highly affected if the value of the two extremes
change.
2. Mean Deviation
 Mean Deviation measures the average deviation /scatters of
a set of observations about a central value(mean/median).
For ungrouped data

M D from the mean =

X i X
n

MD from the median = X i  Md

n
In the case of grouped data:

M D from the mean =

f X X
i i

f i

M D from the median = f i X i  Md

f i
, Where Xi’s are the mid-
points.
Example: The age of a sample of 10 students from a class is
given by: 18, 19, 19, 19, 20, 21, 21, 22, 23, 24
 Find mean deviation (i) from the mean (ii) from the median
 First, find the mean and the median
Arithmetic mean =
 X i
 206  20.6
n 10

Median =

n  2
th
  th
value  n  1 value 20  21
2  = 20.5
2 2

Then find the absolute deviations each of the observations

from the mean and the median
Add them separately, and then divide by the number of
samples.
Example: Find mean absolute deviation from the mean and
from the median for the data given in the table below
Solution: First calculate the Mean and Median, and arrange
the data as follows:
Score Fi Class mark X  X Fi X i  X X i  M d Fi X i  M d
i
(35%)
6 –10 5 8 9.125 45.625 9.167 45.835
11 - 15 10 13 4.125 41.250 4.167 41.67
16 – 20 15 18 0.875 13.125 0.833 12.495
21 – 25 7 23 5.875 41.125 5.833 40.831
25 – 30 3 28 10.875 31.625 10.833 32.499
40 173.75 173.33
fX i i  (5x8) + (10x13) + (15x18) + (7x23) + (3x28)
= 40 + 130 + 270 + 161 + 84
= 685

Mean =
fX i i

685
= 17.125
n 40

Median = Lmd 
 40  CF
2
 PMd
xCW md
FMd

= 15.5 
 20  15
x5 = 17.167
15
Therefore,

M form the mean =

 f X  X = 173.75 = 4.344
i i

f
D
40 i

M from the median

 X  M  173.33 = 4.333
i d
D
n 40
Note: The coefficient of mean deviation, relative measure, form the mean and from the median
are given as follows:

(i) Coefficient or M D form the mean

M D from the mean

= x100%
mean
(ii) Coefficient of M D from the median

M D from the median

= x100%
median

Example: Compute the coefficient of mean deviation from the

mean and from the median for the data given in example
above
Advantages of Mean Deviation
It is easy to understand and compute than standard
deviation
It is not unduly influenced by large or small values.
All values are used in its calculation .
Disadvantages of Mean Deviation
 It ignores the algebraic sign of the deviations.
 It is not suitable for further mathematical processing.
3.Variance and Standard Deviation
 Measures of dispersion/variation around the mean value.
 Variance is defined as the arithmetic mean of the squared deviations
from the population mean.
Properties of Population variance
 All values are used in calculation.
 The units are awkward, the square of the original units.
The formula for the population variance for raw data is:

 2

 X i  
2

N
where:
 = Mean (population)
N = total number of observation

X  2
i X
S2 
n 1
Where;
n = sample size

X = mean
 Alternatively, we can simplify it as follows

S 2

  Xi  X=
 X 2  X 2  2 X X 
 i
2
i

n 1 n 1
 X 2  X 2  2 X X 
 i  i
  Xi  X 2X  Xi
2 2

=   
n 1 n 1 n 1 n 1

 X 
i
2

 
2 2 2 2
X n X 2n X X
=
i
    n i

• n 1 n 1 n 1 n 1 n 1

n X i    X i 
2 2

= n n  1 for small sample size.

n X i    X i 
2 2

= n2 for large sample.

Why do we use n-1?
• In small sample, it provides a better estimate of the variance
of the population from which the sample is drawn.
• However, as n increases above about 30, we can use n instead
of n-1, as the two versions given approximately the same
result for practical purposes.

• Example 5.12. The ages of a family (in years) are:

2, 18, 34, 42. What is the population variance?

96
 Cont’d: Standard Deviation
The population standard deviation is the square root of the population variance.

 X  
2
i
 
N
and the sample standard deviation is the square root of the sample variance.

X  2
i X
S for small sample size &
n 1

X  2
i X
S for large sample size
n
Alternatively, for small sample less than about 30

n X i2    X i 
2

S
n n  1
Example: From the sample data given below, compute
variance and standard deviation .
10, 15, 30, 22, 41, 32
Solution:- n = 6
n X i    X i 
2 2
Xi Xi2
So, S 
2

n n  1
10 100
15 225

   
30 900
2
22 484 6 4414  150
= = 132.8
41 1681
4 5
32 1024

X  150   X   4414
2

S  S  132.8 = 11.51
2
i i
 Variance and Standard deviations for grouped data
For grouped data the population and sample variance denoted by and S2 respectively are given
by:

 fi  X i      f i X i2    f i X i 
2 2

2  
f i 2

S2 
  fi X i  X   n f X    f X 
i i
2
i i
2

f i n2

in which Xi’s are the class mid-points and f i  N for the population and f i  n for the
sample.
Alternatively for small sample size we can use:

n f i X iw    f i X  2

S2 
n n  1
By definition, standard deviations in each case are the square roots of the respective variances.
Example: From the continuous frequency distribution given
below, compute the sample variance and standard deviation.
Class limits Class fi fi X i X X  X X 
i i
2

fi X i  X  2
X i2 f i X 2i
(scores) mark
6 –10 8 5 40 -9.125 83.26 416.328 64 320
11 – 15 13 10 130 -4.125 17.016 170.16 169 1690
16 – 20 18 15 270 0.875 0.7656 11.48 324 4860
21 – 25 23 7 161 5.875 34.516 241.609 529 3703
26 – 30 28 3 84 10.875 118.26 254.80 784 2352
40 685 253.82 1194.8 12925
[n=40>30, better to use the formula for large sample.]
Therefore, for small sample size

 f X  2
i Xi 1194 .8
S 2
  = 30.625
n 1 40  1

S  S 2  30.625 = 5.534

n f i X    f i X  4012925   685
2 2 2
i
Alternatively, S 2  =
n n  1 40 39
= 30.625

S  30.625 = 5.534
Important properties of Variance /Standard Deviation
 The variance/standard deviation of any constant is always
zero.
 A standard deviation of zero implies that there is no
variation at all in the data set. In other words the data
values are the same.
 A variance/standard deviation never be a negative number.
 If a constant is added or subtracted from each observation,
the variance/standard deviation of the resulting observations
will not be affected.
 If every observation is multiplied by a constant K, then the
new variance will be K2 times the original variance and the
new standard deviation will be K times the original
standard deviation.
If there are two sets of data consisting of n 1 and n2 observations with S12 and S 22 as their
respective variances, the combined variance S C2 of (n1 + n2) observations is

S 
2  
n1 S12  d12  n2 S 22  d 22 
C
n1  n2

where d12 = X 1  XC  2
and d 22   X 2  X C  .

2


Herein, the combined mean

n1 X 1  n2 X 2
XC 
n1  n2

in case X 1  X 2 .

n1S12  n2 S 22
S 
2
C
n1  n2
Further, when n1 = n2

S12  S 22
S 
2
C
2
• If Y represents a linear transformation of X as Y = a+bX, with a
as the additive constant and b as the multiplicative constant,
then the variance of Y is: S 2
Y  b 2 2
SX
S X2
,
where is the variance of X. It follows that standard deviation of Y
is bSX. Where SX is the standard deviation of X.
Example: Calculate the standard deviation of the combined
group of 400 items form the following data.
Group A Group B Group C
Number of items (ni) 50 150 200

 
Mean X i 40 50 60

Variance S  
i
2 81 100 121

Solution:-

n1 X 1  n2 X 2  n3 X 3
XC 
n1  n2  n3
50(40)  150(50)  200(60)
=
50  150  200
= 53.75
 di  X  X C
d1 = 40 – 53.75 d2 = 50 – 53.75 d3 = 60 –53.75
= -13.75 = -3.75 = 6.25
Consequently, the combined variance is given as

n S
S C2  1 1
2
 d 3
1  n 2S 2
2  d 2
2 n3 S2
3  d 2
3 
n1  n2  n3

=
    
50 81    13.75  150 100    3.75  200 121   6.25
2 2 2

400
13503  17109  32012
=
400
= 156.56

S C  156.56
= 12.512
4. Coefficient of Variation
 A useful measure of dispersion when the data are in
different units or the data are in the same units but the
means are far apart.
 It is defined as the ratio of the standard deviation to the
arithmetic mean (where mean is different from zero),
expressed as a percentage:
S tan darddeviat ion
CV  X 100%
Mean
for population

CV  X 100%
N
while for sample, it is obtained as
S
CV  X 100%
N
 Coefficient of variation (CV) helps us for comparing the
– Variability,
– Heterogeneity /homogeneity,
– Uniformity, &
– Consistency of two or more distributions.
 A series /distribution with smaller coefficient of variation is
said to be more homogenous /uniform/ consistent than the
other distribution, and vice versa.
Example: The number of employees, the average wages and
the variance of the wages for two factories are given below.
Which factory is consistent in respect to the wages of
employees?
 Summary of wage & employees of two factories.
Factory A Factory B
Number of employees 50 100
Average wages 120 85
Variance of the wages 9 16
Solution:
Factory A Factory B
Given: nA = 50 Given: nB = 100

XA = 120 X B = 85
S A2 = 9 S B2 = 16
• SA SB
CVA  x100% CVB  X 100%
XX XB

CVA  3 X 100% = 2.5% CVB  4 X 100% = 4.7%

120 85
Conclusion: CVA < CVB => the wages of employees of factory A is more consistent than factory
B.
 Standard Scores (Z-Scores)
• The Z-score is defined to indicate whether an
observation is below or above the mean depending
on whether the Z-score is negative or positive.

Z – is called the standard value which is given by

Xi  X
Z
S.d
110
Example: Helen scored 65 in Auditing and Samuel scored 70
in Auditing. If the average score of the whole students in
Auditing is 67 and standard deviation equal to 3, which
student performs better?
Solution

Z Helen  X X Sami  X
Z Helen  Z Samuel 
S S
65  67 70  67
= =
3 3
= -0.6 =1
Therefore, Samuel performs better in Auditing than Helen and than the average result of the
whole students.
 Moments, Skewness, and Kurtosis
Moments
Moments tell us information about the “shape” of
the distribution
It is represented by Mr, r =0, 1, …, r, which is called
the rth moment.
We can have moments about any constant number,
about the mean, zero or any desired value.
 In general, the rth moment about any arbitrary constant
number, say A, is given by
 X i  A
r

Mr 
n
Note: For grouped data the rth moment about any
constant number, say A, is given as:
 f  X  A
r
i i
Mr 
f i

where;
f i => Frequency of Xi in case of discrete grouped data
f i => Frequency of the i class in case of continuous groped data
th

th
and here Xi is the class mark of the i class
Class work: Using the following data, compute
the first THREE moments about TWO(2).
– Also calculate the first THREE central
moments.
4, 4, 5, 6, 7, 8, 10 , 10, 24, 26
Solution(central moments):
M0=1
M1=8.4
M2=128.2
M3=?
 Skewness
 Skewness refers us lack of symmetry.
 We study skewness to have an idea about the shape of the
curve which we can draw with the help of the frequency
distribution.
 Frequency distributions often found skewed on either side
of its central value. As a result, it has a longer tail either to
the left or to the right.
 If there is a longer tail to the right of the center, the
distribution is said to be positively skewed.
 If the tail is longer to the left of the center, the distribution is
said to be negatively skewed.
 A positive Skewness means a greater dispersal of individual
observations towards the right of the central value.
 A negative Skewness, on the other hand, implies that
individual observations have greater dispersal towards the
left of the central value.
 Skewness, therefore, not only refers to the lack of symmetry
in distribution, it also shows the direction of dispersion of
individual observations on either side of the center of the
distribution.
 Accordingly, a measure of skewness quantifies the extent of
departure from symmetry and also indicates the direction in
which the departure takes place.
Measures of Skewness:
a) Moment coefficient of Skewness
b) Pearsonian coefficient of Skewness
a) Moment coefficient of Skewness
In terms of moment coefficient, skewness is defined as:

= =

Where M2 = S2 = variance
Interpretation:
(1) If = 0 => Symmetrical distribution
(2) If < 0 => Negatively skewed distribution
(3) If > 0 => positively skewed distribution
(4) A greater or smaller value of means a greater or smaller degree of skewness.
b) Pearsonian coefficient of Skewness
 This measure is based on the fact that when a distribution
drifts away from symmetry, its mean, median, and mode
tend to deviate from each other.
 This results about from the presences of exceptionally high
or low observations affecting the value of the mean the
most, and that of the mode the least.
 Thus, it is the direction in which mode drifts from mean that
determines whether a distribution will have positive or
negative skewness.
• Thus, the Pearsonian coefficient of skewness is defined as :

In which S is standard deviation. Using the empirical relationship among mean, mode and median in a
moderately skewed distribution, i.e, mode = mean – 3(mean – median), the above equation can be modified
as

Note:
1.
2. If the distribution is symmetrical
3. If the distribution is positively skewed
4. If , the distribution is negatively skewed
Example 5.23. Find the skewness of the following data using pearsonian’s coefficient of skewness.
Solution:-
Arrange the data in an increasing order
1, 2, 4, 5, 6, 7, 8, 10, 30, 32

= 6.5

= 10.5

= 124.06

= 11.14

Therefore, =

= 1.077
Interpretation: The distribution is positively skewed.
 Kurtosis
• kurtosis measures the characteristics of flatness or
peakdness at the top of the distribution.
• Taking symmetrical distribution as a frame of reference,
– a distribution which is more peaked than the normal is
known as Leptokurtic distribution.
– The one whose polygon is flat at its top is called a
Platykurtic distribution.
– A distribution with a polygon which is neither to high in
peak, nor too flat at the top is termed as Mesokurtic
distribution.
 (i) The coefficient of Kurtosis
The coefficient of kurtosis denoted by K is defined as a ratio of inter-quartile range to inter-
decile range.
𝑄3 −𝑄1
K=
𝐷9 −𝐷1

Interpretation:
 If K = 0.5, approximately the distribution is Mesokurtic
 If K > 0.5, approximately the distribution is leptokurtic
 If K<0.5, approximately the distribution is platykurtic.
 Moment coefficient of Kurtosis
Moment coefficient of Kurtosis is Kurtosis in terms of the fourth moment about the mean, denoted by B2, and is
defined as
𝑀4 𝑀4
𝐵2 = 2 =
𝑀2 𝑆4

Where S is standard deviation.

Interpretation:
 If 𝐵2 = 0 => Mesokurtic distribution
 If 𝐵2 > 0 => Leptokurtic distribution
 If 𝐵2 < 0 => Platykurtic distribution