BUSINESS STATISTICS

CENTRAL TENDENCIES AND

DISPERSION
UNIT 2
 MEAN
Average.
Balance Point.
Can be affected by outliers.
Grouped data :
(midpoint * frequency)
(frequencies)
 MEDIAN
Middle point after a variables values are
arranged in order.
For an even set of values, the median will be
the arithmetic average of the two middle
numbers
Divides a distribution into two equal halves.
Better measure of central tendency when the
data is skewed.
Can be used for qualitative data.
The 50th percentile.
 MODE
Most common data point.
Possible to have no mode in a data set.
Possible to have more than one mode in
a data set.
Can be used for qualitative data.
May not be at the center of the
distribution.
Where do mean, median and modes lie
in a skewed distribution?
 WEIGHTED MEAN
Enables calculation of an average
that takes into account the
importance of each value.
Weighted mean = (w * x)
w
 GEOMETRIC MEAN
The nth root of the product of n
numbers.
Shows multiplicative effects over
time in compound interest and
inflation calculations.
Hint : Use it whenever you are
calculating the average percentage
change in some variable over time.
Also depicts percentage change over
time.
 KURTOSIS
A measure of whether the data is
peaked or flat relative to a normal
distribution.
Lepto kurtic : A curve having relatively
higher peak than the normal curve.
Platykurtic : More flat topped than the
normal curve.
Mesokurtic : Normal curve itself.
KURTOSIS
 MEASURES OF DISPERSION
Range.
Mean deviation.
Quartile deviation.
Standard deviation.
Variance.
Coefficient of variation.
 RANGE
Range is the difference between the
largest and smallest observations.
Interquartile range (IQR) measures
the spread in the middle 50% of the
data.
Difference between the Q3(75th
percentile) and Q1 (25th percentile)
observations.
 FIVE NUMBER SUMMARY
Minimum
First quartile (Q1)
Median (Q2)
Third quartile (Q3)
Maximum
 BOX PLOT : EXERCISE
Depicts range and interquartile
range.

1.5 IQR IQR 1.5 IQR

1 2 2 3 3 3 4 4 5 5 6 7 8 9 10 10 12 15
16 30
 MEAN DEVIATION

All the data points are taken into

consideration.
Not influenced by extreme values.
 VARIANCE
Population variance :

Sample variance :

Population and sample standard

deviations are the square roots of the
respective variances.
 CHEBYCHEVS THEOREM
For any population with mean , standard
deviation , and k > 1, the percent of
observations that lie within the interval
( ++ k ) is at least
100[1 (1/k2)]%

In reality, for many large populations, the

empirical rule is,
68% in the interval ++ 1
95% in the interval ++ 2
Almost all values within ++ 3
 EXAMPLE
Two stocks have shown the following
statistics over the last several
months :
sA = Rs 20.00 ; xA = Rs 40.00
sB = Rs 80.00 ; xB = Rs 800.00
Which stock is riskier to purchase?
COEFFICIENT OF VARIATION
Measure of relative dispersion that
expresses the standard deviation as a
percentage of the mean.
Population coefficient of variation is
(/)*100%
Sample coefficient of variation is
(s/xx )*100%
CONCLUSION