IBA, JU 4

Master of Business Administration

Course Instructor: Dr Swapan Kumar Dhar
Measures of Dispersion or Variability
Measures of Central Tendency do not reveal how much the individual values of the variate are
concentrated towards the central value or average. A measure of central tendency, such as the mean or
the median, only describes the center of the data. It is valuable from that standpoint, but it does not tell us
anything about the spread of the data. For example, suppose, you are visiting somewhere and you want
to cross a river on foot. Your guide has told you that the river ahead averaged 3 feet in depth, would you
want to wade across on foot without additional information? Probably not. You would want to know
something about the variation in the depth. Is the maximum depth of the river 3.25 feet and minimum 2.75
feet? If that is the case, you would probably agree to cross. What if you learn that the river depth ranges
from 0.50 feet to 5.5 feet? Your decision would probably be not to cross. Before making a decision about
crossing the river, you want information on both the typical depth and the dispersion in the depth of the
river. Let us give another example.
The mean of 40, 50 and 60 is 50
The mean of 10, 50 and 90 is 50.
In the first case the values are close to the average 50, while in the second case the values are widely
spread from the average 50.
So, it is necessary to know how the values of the variate are dispersed about the central value.
Dispersion is the deviation of the values of a variate from its central value. It measures the degree of
variability of the values of the variate among themselves. If all the values of a variate are equal, the
dispersion is zero and it is large for the values widely dispersed.
Different Measures of Dispersion:
There are many measures of dispersion. But here we are considering only 4 of them. They are:
(i) Range
(ii) Variance
(iii) Standard deviation
(iv) Coefficient of variation
Range
For simple distribution, Range = Highest value Lowest value
For grouped frequency distribution,
Range = Upper limit of the highest class Lower limit of the lowest class.
Alternatively,
Range = Upper boundary of the highest class Lower boundary of the lowest class.
The range measures the total spread in the data set.
Example 1: The capacities of several plastic containers are 30, 20, 37, 64 and 27 liters respectively.
What is the range?
Solution: Arranging in ascending order, we get 20, 27, 37, 38, and 64.
Range = 64 20 = 44 liters.
Example 2: Suppose a sample of 40 hourly wages was grouped into this frequency distribution:
Hourly earnings (in $) Number
5 up to 10 10
10 up to 15 21
15 up to 20 9
Find the range.
Solution: Range = $ 20 - # 5 = $ 15.
Example 3: Find the range of the distribution:
Class interval 10-19 20-29 30-39 40-49
Frequency 12 18 24 10
Solution: Here we have to find the boundaries. The formulas to find out the boundaries are:
The lower class boundary = Lower class limit - ) (
2
1
d
1
The upper class boundary = Upper class limit + ) (
2
1
d
Where d = difference between the upper class limit of a class interval and lower class limit of the following
class.
Here for the first class,
The lower class boundary = 10 -
1
(20 19)
2
= 9.5
The Upper class boundary = 19 +
1
(1)
2
= 19.5
Class boundary Frequency
9.5 - 19.5 12
19.5 - 29.5 18
29.5 - 39.5 24
39.5 - 49.5 10
Range = upper boundary of the highest class lower boundary of the lowest class
= 49.5-9.5 = 40.
Example 4: Following represents the current years Return on Equity of the 25 companies in an investors
portfolio.
Solution:
Here Highest value = 22.1 and lowest value = -8.1.
So Range = 22.1 (-8.1) = 30.2
Variance and Standard Deviation:
Variance is the arithmetic mean of the squared deviations from the mean. Standard deviation (S.D) is the
positive square root of the variance.
Population Variance
For ungrouped data, the population variance denoted by
2

(sigma square) is
2
2
(X )
N




Where, X The value of an observation in the population

The arithmetic mean of the population
X
N

N The total number of observations in the population.
Working formula for population variance is
2
2
2
X X
N N

_

,

Example 5: The ages of all patients in the cancer ward of DMC Hospital are 38, 26, 13, 41 and 22 years.
What is the population variance?
Solution:
2
2 2 2 2 2
2
(38) (26) (13) (41) (22) 38 26 ... 22
5 5
+ + + + + + +

_

,
106.8 Years.
Population Standard Deviation
For ungrouped data
2
2 2
(X ) X X
N N N


_

,

For the previous problem,
106.8
10.33 Years.
-8.1 3.2 5.9 8.1 12.3
-5.1 4.1 6.3 9.2 13.3
-3.1 4.6 7.9 9.5 14.0
-1.4 4.8 7.9 9.7 15.0
1.2 5.7 8.0 10.3 22.1
2
Sample Variance
For ungrouped data, the formula for the sample variance is
2
2
(X X)
S
n 1

Where,
X
The value of the observations in the sample

X
X
n

The mean of the sample

n Total number of observations in the sample.
Working formula
2
2
2
( X)
X
n
S
n 1

Example 6: The hourly wages for a sample of part-time employees of certain firm are: $2, $10, $6, $8
and $9. What is the sample variance?
Solution: Using the working formula, we have
2
2
2
( X)
X
n
S
n 1

Hourly wage
(X)
2
X
2 4
10 100
6 36
8 64
9 81
$35 285
2
2
(35)
285
40
5
S
5 1 4

10 $
Population Variance:
(a) For grouped data,
2
2
f(X X)
N

2
2
fX fX
, N f
N N

_

,

2
2
fX fX
S.D
N N

_

,

(b) For grouped frequency distribution
2
2
2
fX fX
N N

_

,

2
2
fX fX
S.D
N N

_

,

Where X Mid value.
Sample Variance
(a) For simple frequency distribution
2
2
f(X X)
S
n 1

2
2
( )
1

X
X
n
n
3
(b)Grouped frequency distribution
2
2
f(X X)
S
n 1

2
2
( X)
X
n
n 1

Where X Mid value of a class.

Example 7: Find the standard deviation from the following data:
Daily wages ($) 20-24 25-29 30-34 35-39
Number of workers 16 28 14 12
Solution: Calculation.
Class interval
Frequency ) ( f
Mid value( x )
fx
2
fx
20-24 16 22 352 7744
25-29 28 27 756 20412
30-34 14 32 448 14336
35-39 12 37 444 16428
Total N=70 2000 58920
Variance
2
2
fX fX
N N

_

,


2
58920 2000
$25, 388
70 70

_

,
S.D. 5.04 .
Example 8: Marks obtained by all 100 students in a class in an examination are as follows:
Marks Number of students
Below 10 14
Below 20 30
Below 30 50
Below 40 75
Below 50 87
Below 60 95
Below 70 100
Find the mean, variance and S.D.
Solution: Calculation
Marks Number of students ) ( f Mid value( x ) fx
2
fx
0-10 14 5 70 350
10-20 16 15 240 3600
20-30 20 25 500 12500
30-40 25 35 875 30625
40-50 12 45 540 24300
50-60 8 55 440 24200
60-70 5 65 325 21125
Total N=100 2990 116700
Variance
2
2
fX fX
N N

_

,


2
116700 2990
100 100

_

,
1167 894.01 272.99 .
S.D. 16.52 Where Mean
fx
29.90
N

.
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Example 9: Find the S.D. of the following distribution.
Daily wages ($) Number of workers
0 and above 200
10 and above 155
20 and above 127
30 and above 92
40 and above 54
50 and above 0
Solution: Calculation of S.D.
Daily wages Number of workers ) ( f Mid value( x ) fx
2
fx
0-10 45 5 225 1125
10-20 28 15 420 6300
20-30 35 25 875 21875
30-40 38 35 1330 46550
40-50 54 45 2430 109350
Total N=200 5280 185200
2
2
fX fX
S.D
N N

_

,


2
185200 5280
200 200

_

,
926 696.96
= 15.13.
Coefficient of Variation (C.V)
The coefficient of Variation, denoted by the symbol CV, measures the scatter in the data relative to the
mean. It may be computed as follows:
S.D
C.V 100
Mean
.
As a relative measure, the CV is particularly useful when comparing the variability of two or more data
sets that are expressed in different units of measurement.
Example 10: The combined grade point average in different semesters of two students is shown below:
Student
CGPA
1 2 3 4 5 6 7 8
A 2.5 2.5 3.0 3.5 3.5 4.0 3.5 3.5
B 2.5 3.0 4.0 4.0 4.0 2.0 2.5 4.0
Which student would you consider better throughout the courses of studies?
Solution: For student A,
2
i
i 1
1 1
2 2 N
2 2 i
1 1 i
i 1
1 1 1
1
1
N
1
1
(x )
C.V. for A
26
3.25
8
( x ) 1 1 1 (26)
x 86.5 0.25.
N N N 8 8
0.25 0.5.
0.5
100 100 15.38%.
3.25

1 1
1 1
] ]

For student B,
5
2
i
i 1
2 2
2
2 2
2 2 i
2 2 i
i 1
2 2 2
2
N N
2
2
(x )
0.79
100 24.31%
3.25
26
3.25
8
( x ) 1 1 1 (26)
x 89.5 0.625.
N N 8 8
0.625 0.79.
C.V. for B
N
100

1 1
1 1
] ]

It is observed that the average CGPA of both students are same but C.V. of A is less than that of C.V. of
B. This implies that student A is better than B throughout the course of studies. The performance of A is
more homogeneous in all semesters.
Example 11: Find the coefficient of variation from the following frequency distribution giving the weekly
wages of 100 workers.
Wages (Taka) Number of workers
260-269 6
270-279 14
280-289 29
290-299 23
300-309 16
310-319 10
320-329 2
Solution: Mean = 2 . 291 x
2
2
fx fx
S.D
N N

_

,

where x Mid value
39 . 1 .
13.9
C.V 100
291.2
= 4.77%.
Example 12: The scores of two batsmen A and B in ten consecutive innings are as follows:
: A
70 34 46 58 62 39 11 80 20 50
: B
48 52 66 44 32 58 80 42 68 40
Find which batsman is more consistent in scoring.
Solution: For batsman
A
, x 47 andS.D 20.57 .

20.57
C.V 100
47
43.76%
For batsman
B
, x 53 and S.D 14.09 .
14.09
C.V 100
53
26.58%
Batsman
B
is more consistent (less variability) than the batsman A because 43.76% > 26.58%.
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