Lecture 1

Data and Statistics

 Lecture Outline

Applications in Business and Economics

Data

Data Sources

Descriptive Statistics

Statistical Inference

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 Applications in
Business and Economics
Accounting
Public accounting firms use statistical sampling procedures when
conducting audits for their clients.
Finance
Financial advisors use a variety of statistical information,
including price-earnings ratios and dividend yields, to guide their
investment recommendations.
Marketing
Electronic point-of-sale scanners at retail checkout counters are
being used to collect data for a variety of marketing research
applications.

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 Applications in
Business and Economics
Production
A variety of statistical quality control charts are used to monitor
the output of a production process.
Economics
Economists use statistical information in making forecasts about
the future of the economy or some aspect of it.

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 Data

Elements, Variables, and Observations

Scales of Measurement

Qualitative and Quantitative Data

Cross-Sectional and Time Series Data

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 Data and Data Sets

Data are the facts and figures that are collected,

summarized, analyzed, and interpreted.

The data collected in a particular study are referred to as

the data set.

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 Elements, Variables, and
Observations
The elements are the entities on which data are collected.
A variable is a characteristic of interest for the elements.
The set of measurements collected for a particular element is
called an observation.
The total number of data values in a data set is the number of
elements multiplied by the number of variables.

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 Data, Data Sets, Elements,
Variables, and Observations
Observation
Variables
Stock Annual Earn/
Company Exchange Sales($M) Sh.($)
Dataram AMEX 73.10 0.86
EnergySouth OTC 74.00 1.67
Keystone NYSE 365.70 0.86
LandCare NYSE 111.40 0.33
Psychemedics AMEX 17.60 0.13

Elements Data Set Datum

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 Scales of Measurement
Scales of measurement include:
Nominal
Ordinal
Interval
Ratio
The scale determines the amount of information contained in the
data.
The scale indicates the data summarization and statistical
analyses that are most appropriate.

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 Scales of Measurement

Nominal

Data are labels or names used to identify an attribute of

the element.

A nonnumeric label or a numeric code may be used.

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 Scales of Measurement
Nominal
Example:
Students of a university are classified by the school in
which they are enrolled using a nonnumeric label such as
Business, Humanities, Education, and so on.

Alternatively, a numeric code could be used for the school

variable (e.g. 1 denotes Business, 2 denotes Humanities, 3
denotes Education, and so on).

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 Scales of Measurement
Ordinal

The data have the properties of nominal data and the

order or rank of the data is meaningful.

A nonnumeric label or a numeric code may be used.

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 Scales of Measurement
Ordinal
Example:
Students of a university are classified by their class
standing using a nonnumeric label such as Freshman,
Sophomore, Junior, or Senior.

Alternatively, a numeric code could be used for the class

standing variable (e.g. 1 denotes Freshman, 2 denotes
Sophomore, and so on).

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 Scales of Measurement
Interval

The data have the properties of ordinal data and the interval
between observations is expressed in terms of a fixed unit of
measure.

Interval data are always numeric.

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 Scales of Measurement
Interval
Example:
Melissa has an SAT score of 1205, while Kevin has an
SAT score of 1090. Melissa scored 115 points more than
Kevin.

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 Scales of Measurement
Ratio
The data have all the properties of interval data and the
ratio of two values is meaningful.
Variables such as distance, height, weight, and time use
the ratio scale.
This scale must contain a zero value that indicates that
nothing exists for the variable at the zero point.

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 Scales of Measurement
Ratio

Example:

Melissa’s college record shows 36 credit hours earned,

while Kevin’s record shows 72 credit hours earned. Kevin
has twice as many credit hours earned as Melissa.

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Qualitative and Quantitative Data
Data can be further classified as being qualitative or quantitative.

The statistical analysis that is appropriate depends on whether

the data for the variable are qualitative or quantitative.

In general, there are more alternatives for statistical analysis

when the data are quantitative.

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 Qualitative Data
Qualitative data are labels or names used to identify an attribute
of each element.

Qualitative data use either the nominal or ordinal scale of

measurement.

Qualitative data can be either numeric or nonnumeric.

The statistical analysis for qualitative data are rather limited.

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 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 are meaningful only with
quantitative data.

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 Cross-Sectional and Time Series
Data
Cross-sectional data are collected at the same or approximately
the same point in time.
Example: data detailing the number of building permits
issued in June 2000 in each of the counties of Texas
Time series data are collected over several time periods.
Example: data detailing the number of building permits
issued in Travis County, Texas in each of the last 36 months

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 Data Sources
Existing Sources
Data needed for a particular application might already
exist within a firm. Detailed information is often kept
on customers, suppliers, and employees for example.
Substantial amounts of business and economic data are
available from organizations that specialize in
collecting and maintaining data.

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 Data Sources
Existing Sources

Government agencies are another important source of data.

Data are also available from a variety of industry associations

and special-interest organizations.

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 Data Sources
Internet
The Internet has become an important source of data.
Most government agencies, like the Bureau of the Census
(www.census.gov), make their data available through a web
site.
More and more companies are creating web sites and
providing public access to them.
A number of companies now specialize in making information
available over the Internet.

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 Data Sources
Statistical Studies
Statistical studies can be classified as either experimental or
observational.
In experimental studies the variables of interest are first
identified. Then one or more factors are controlled so that
data can be obtained about how the factors influence the
variables.
In observational (nonexperimental) studies no attempt is made
to control or influence the variables of interest.
• A survey is perhaps the most common type of
observational study.

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Data Acquisition Considerations
Time Requirement
Searching for information can be time consuming.
Information might no longer be useful by the time it is
available.
Cost of Acquisition
Organizations often charge for information even when it is not
their primary business activity.
Data Errors
Using any data that happens to be available or that were
acquired with little care can lead to poor and misleading
information.

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 Descriptive Statistics

Descriptive statistics are the tabular, graphical, and numerical

methods used to summarize data.

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 Example: Hudson Auto Repair
The manager of Hudson Auto would like to have a better
understanding of the cost of parts used in the engine tune-
ups performed in the shop. She examines 50 customer
invoices for tune-ups. The costs of parts, rounded to the
nearest dollar, are listed below.

91 78 93 57 75 52 99 80 97 62
71 69 72 89 66 75 79 75 72 76
104 74 62 68 97 105 77 65 80 109
85 97 88 68 83 68 71 69 67 74
62 82 98 101 79 105 79 69 62 73

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 Example: Hudson Auto Repair
Tabular Summary (Frequencies and Percent Frequencies)

Parts Percent
Cost ($) Frequency Frequency
50-59 2 4
60-69 13 26
70-79 16 32
80-89 7 14
90-99 7 14
100-109 5 10
Total 50 100

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 Example: Hudson Auto Repair
Graphical Summary (Histogram)
18
16
14
Frequency

12
10
8
6
4
2
Parts
50 60 70 80 90 100 110 Cost ($)

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 Example: Hudson Auto Repair
Numerical Descriptive Statistics

The most common numerical descriptive statistic is the

average (or mean).

Hudson’s average cost of parts, based on the 50 tune-ups

studied, is $79 (found by summing the 50 cost values and then
dividing by 50).

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 Statistical Inference

Statistical inference is the process of using data obtained from a

small group of elements (the sample) to make estimates and test

hypotheses about the characteristics of a larger group of elements

(the population).

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 Example: Hudson Auto Repair
Process of Statistical Inference

1. Population
consists of all 2. A sample of 50
tune-ups. Average engine tune-ups
cost of parts is is examined.
unknown.
unknown

4. The value of the 3. The sample data

sample average is used provide a sample
to make an estimate of average cost of
the population average. $79 per tune-up.

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