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Slides Prepared by JOHN S. LOUCKS St. Edward’s University © 2005 Thomson/South-Western Slide 1 Chapter 3 Descriptive Statistics: Numerical Measures Part B Measures of Distribution Shape, Relative Location, and Detecting Outliers Exploratory Data Analysis Measures of Association Between Two Variables The Weighted Mean and Working with Grouped Data © 2005 Thomson/South-Western Slide 2 Measures of Distribution Shape, Relative Location, and Detecting Outliers Distribution Shape z-Scores Chebyshev’s Theorem Empirical Rule Detecting Outliers © 2005 Thomson/South-Western Slide 3 Distribution Shape: Skewness An important measure of the shape of a distribution is called skewness. The formula for computing skewness for a data set is somewhat complex. Skewness can be easily computed using statistical software. © 2005 Thomson/South-Western Slide 4 Distribution Shape: Skewness Symmetric (not skewed) • Skewness is zero. • Mean and median are equal. Relative Frequency .35 Skewness = 0 .30 .25 .20 .15 .10 .05 0 © 2005 Thomson/South-Western Slide 5 Distribution Shape: Skewness Moderately Skewed Left • Skewness is negative. • Mean will usually be less than the median. Relative Frequency .35 Skewness = - .31 .30 .25 .20 .15 .10 .05 0 © 2005 Thomson/South-Western Slide 6 Distribution Shape: Skewness Moderately Skewed Right • Skewness is positive. • Mean will usually be more than the median. Relative Frequency .35 Skewness = .31 .30 .25 .20 .15 .10 .05 0 © 2005 Thomson/South-Western Slide 7 Distribution Shape: Skewness Highly Skewed Right • Skewness is positive (often above 1.0). • Mean will usually be more than the median. Relative Frequency .35 Skewness = 1.25 .30 .25 .20 .15 .10 .05 0 © 2005 Thomson/South-Western Slide 8 Distribution Shape: Skewness Example: Apartment Rents Seventy efficiency apartments were randomly sampled in a small college town. The monthly rent prices for these apartments are listed in ascending order on the next slide. © 2005 Thomson/South-Western Slide 9 Distribution Shape: Skewness 425 440 450 465 480 510 575 430 440 450 470 485 515 575 430 440 450 470 490 525 580 435 445 450 472 490 525 590 435 445 450 475 490 525 600 © 2005 Thomson/South-Western 435 445 460 475 500 535 600 435 445 460 475 500 549 600 435 445 460 480 500 550 600 440 450 465 480 500 570 615 440 450 465 480 510 570 615 Slide 10 Distribution Shape: Skewness Relative Frequency .35 Skewness = .92 .30 .25 .20 .15 .10 .05 0 © 2005 Thomson/South-Western Slide 11 z-Scores The z-score is often called the standardized value. It denotes the number of standard deviations a data value xi is from the mean. xi - x zi s © 2005 Thomson/South-Western Slide 12 z-Scores An observation’s z-score is a measure of the relative location of the observation in a data set. A data value less than the sample mean will have a z-score less than zero. A data value greater than the sample mean will have a z-score greater than zero. A data value equal to the sample mean will have a z-score of zero. © 2005 Thomson/South-Western Slide 13 z-Scores z-Score of Smallest Value (425) xi - x 425 - 490.80 z - 1.20 s 54.74 Standardized Values for Apartment Rents -1.20 -0.93 -0.75 -0.47 -0.20 0.35 1.54 -1.11 -0.93 -0.75 -0.38 -0.11 0.44 1.54 -1.11 -0.93 -0.75 -0.38 -0.01 0.62 1.63 -1.02 -0.84 -0.75 -0.34 -0.01 0.62 1.81 -1.02 -0.84 -0.75 -0.29 -0.01 0.62 1.99 © 2005 Thomson/South-Western -1.02 -0.84 -0.56 -0.29 0.17 0.81 1.99 -1.02 -0.84 -0.56 -0.29 0.17 1.06 1.99 -1.02 -0.84 -0.56 -0.20 0.17 1.08 1.99 -0.93 -0.75 -0.47 -0.20 0.17 1.45 2.27 -0.93 -0.75 -0.47 -0.20 0.35 1.45 2.27 Slide 14 Chebyshev’s Theorem At least (1 - 1/z2) of the items in any data set will be within z standard deviations of the mean, where z is any value greater than 1. © 2005 Thomson/South-Western Slide 15 Chebyshev’s Theorem At least 75% of the data values must be within z = 2 standard deviations of the mean. At least 89% of the data values must be within z = 3 standard deviations of the mean. At least 94% of the data values must be within z = 4 standard deviations of the mean. © 2005 Thomson/South-Western Slide 16 Chebyshev’s Theorem For example: Let z = 1.5 with x = 490.80 and s = 54.74 At least (1 - 1/(1.5)2) = 1 - 0.44 = 0.56 or 56% of the rent values must be between x - z(s) = 490.80 - 1.5(54.74) = 409 and x + z(s) = 490.80 + 1.5(54.74) = 573 (Actually, 86% of the rent values are between 409 and 573.) © 2005 Thomson/South-Western Slide 17 Empirical Rule For data having a bell-shaped distribution: 68.26% of the values of a normal random variable are within +/- 1 standard deviation of its mean. 95.44% of the values of a normal random variable are within +/- 2 standard deviations of its mean. 99.72% of the values of a normal random variable are within +/- 3 standard deviations of its mean. © 2005 Thomson/South-Western Slide 18 Empirical Rule 99.72% 95.44% 68.26% m – 3s m – 1s m – 2s © 2005 Thomson/South-Western m m + 3s m + 1s m + 2s x Slide 19 Detecting Outliers An outlier is an unusually small or unusually large value in a data set. A data value with a z-score less than -3 or greater than +3 might be considered an outlier. It might be: • an incorrectly recorded data value • a data value that was incorrectly included in the data set • a correctly recorded data value that belongs in the data set © 2005 Thomson/South-Western Slide 20 Detecting Outliers The most extreme z-scores are -1.20 and 2.27 Using |z| > 3 as the criterion for an outlier, there are no outliers in this data set. Standardized Values for Apartment Rents -1.20 -0.93 -0.75 -0.47 -0.20 0.35 1.54 -1.11 -0.93 -0.75 -0.38 -0.11 0.44 1.54 -1.11 -0.93 -0.75 -0.38 -0.01 0.62 1.63 -1.02 -0.84 -0.75 -0.34 -0.01 0.62 1.81 -1.02 -0.84 -0.75 -0.29 -0.01 0.62 1.99 © 2005 Thomson/South-Western -1.02 -0.84 -0.56 -0.29 0.17 0.81 1.99 -1.02 -0.84 -0.56 -0.29 0.17 1.06 1.99 -1.02 -0.84 -0.56 -0.20 0.17 1.08 1.99 -0.93 -0.75 -0.47 -0.20 0.17 1.45 2.27 -0.93 -0.75 -0.47 -0.20 0.35 1.45 2.27 Slide 21 Exploratory Data Analysis Five-Number Summary Box Plot © 2005 Thomson/South-Western Slide 22 Five-Number Summary 1 Smallest Value 2 First Quartile 3 Median 4 Third Quartile 5 Largest Value © 2005 Thomson/South-Western Slide 23 Five-Number Summary Lowest Value = 425 First Quartile = 445 Median = 475 Third Quartile = 525 425 440 450 465 480 510 575 430 440 450 470 485 515 575 430 440 450 470 490 525 580 435 445 450 472 490 525 590 435 445 450 475 490 525 600 © 2005 Thomson/South-Western Largest Value = 615 435 445 460 475 500 535 600 435 445 460 475 500 549 600 435 445 460 480 500 550 600 440 450 465 480 500 570 615 440 450 465 480 510 570 615 Slide 24 Box Plot A box is drawn with its ends located at the first and third quartiles. A vertical line is drawn in the box at the location of the median (second quartile). 375 400 425 450 475 500 525 550 575 600 625 Q1 = 445 Q3 = 525 Q2 = 475 © 2005 Thomson/South-Western Slide 25 Box Plot Limits are located (not drawn) using the interquartile range (IQR). Data outside these limits are considered outliers. The locations of each outlier is shown with the symbol * . … continued © 2005 Thomson/South-Western Slide 26 Box Plot The lower limit is located 1.5(IQR) below Q1. Lower Limit: Q1 - 1.5(IQR) = 445 - 1.5(75) = 332.5 The upper limit is located 1.5(IQR) above Q3. Upper Limit: Q3 + 1.5(IQR) = 525 + 1.5(75) = 637.5 There are no outliers (values less than 332.5 or greater than 637.5) in the apartment rent data. © 2005 Thomson/South-Western Slide 27 Box Plot Whiskers (dashed lines) are drawn from the ends of the box to the smallest and largest data values inside the limits. 375 400 425 450 475 500 525 550 575 600 625 Smallest value inside limits = 425 © 2005 Thomson/South-Western Largest value inside limits = 615 Slide 28 Measures of Association Between Two Variables Covariance Correlation Coefficient © 2005 Thomson/South-Western Slide 29 Covariance The covariance is a measure of the linear association between two variables. Positive values indicate a positive relationship. Negative values indicate a negative relationship. © 2005 Thomson/South-Western Slide 30 Covariance The correlation coefficient is computed as follows: sxy s xy ( xi - x )( yi - y ) n -1 ( xi - m x )( yi - m y ) N © 2005 Thomson/South-Western for samples for populations Slide 31 Correlation Coefficient The coefficient can take on values between -1 and +1. Values near -1 indicate a strong negative linear relationship. Values near +1 indicate a strong positive linear relationship. © 2005 Thomson/South-Western Slide 32 Correlation Coefficient The correlation coefficient is computed as follows: rxy sxy sx s y for samples © 2005 Thomson/South-Western xy s xy s xs y for populations Slide 33 Correlation Coefficient Correlation is a measure of linear association and not necessarily causation. Just because two variables are highly correlated, it does not mean that one variable is the cause of the other. © 2005 Thomson/South-Western Slide 34 Covariance and Correlation Coefficient A golfer is interested in investigating the relationship, if any, between driving distance and 18-hole score. Average Driving Average Distance (yds.) 18-Hole Score 277.6 69 259.5 71 269.1 70 267.0 70 255.6 71 272.9 69 © 2005 Thomson/South-Western Slide 35 Covariance and Correlation Coefficient x y 277.6 259.5 269.1 267.0 255.6 272.9 69 71 70 70 71 69 ( xi - x ) ( yi - y ) ( xi - x )( yi - y ) 10.65 -7.45 2.15 0.05 -11.35 5.95 Average 266.95 70.0 Std. Dev. 8.2192 .8944 © 2005 Thomson/South-Western -1.0 1.0 0 0 1.0 -1.0 -10.65 -7.45 0 0 -11.35 -5.95 Total -35.40 Slide 36 Covariance and Correlation Coefficient Sample Covariance sxy ( x - x )( y - y ) -35.40 i i n-1 6-1 - 7.08 Sample Correlation Coefficient rxy sxy sx s y -7.08 -.9631 (8.2192)(.8944) © 2005 Thomson/South-Western Slide 37 The Weighted Mean and Working with Grouped Data Weighted Mean Mean for Grouped Data Variance for Grouped Data Standard Deviation for Grouped Data © 2005 Thomson/South-Western Slide 38 Weighted Mean When the mean is computed by giving each data value a weight that reflects its importance, it is referred to as a weighted mean. In the computation of a grade point average (GPA), the weights are the number of credit hours earned for each grade. When data values vary in importance, the analyst must choose the weight that best reflects the importance of each value. © 2005 Thomson/South-Western Slide 39 Weighted Mean wx x w i i i where: xi = value of observation i wi = weight for observation i © 2005 Thomson/South-Western Slide 40 Grouped Data The weighted mean computation can be used to obtain approximations of the mean, variance, and standard deviation for the grouped data. To compute the weighted mean, we treat the midpoint of each class as though it were the mean of all items in the class. We compute a weighted mean of the class midpoints using the class frequencies as weights. Similarly, in computing the variance and standard deviation, the class frequencies are used as weights. © 2005 Thomson/South-Western Slide 41 Mean for Grouped Data Sample Data fM x i i n Population Data fM m i i N where: fi = frequency of class i Mi = midpoint of class i © 2005 Thomson/South-Western Slide 42 Sample Mean for Grouped Data Given below is the previous sample of monthly rents for 70 efficiency apartments, presented here as grouped data in the form of a frequency distribution. Rent ($) 420-439 440-459 460-479 480-499 500-519 520-539 540-559 560-579 580-599 600-619 © 2005 Thomson/South-Western Frequency 8 17 12 8 7 4 2 4 2 6 Slide 43 Sample Mean for Grouped Data Rent ($) 420-439 440-459 460-479 480-499 500-519 520-539 540-559 560-579 580-599 600-619 Total fi 8 17 12 8 7 4 2 4 2 6 70 Mi 429.5 449.5 469.5 489.5 509.5 529.5 549.5 569.5 589.5 609.5 © 2005 Thomson/South-Western f iMi 3436.0 7641.5 5634.0 3916.0 3566.5 2118.0 1099.0 2278.0 1179.0 3657.0 34525.0 34,525 x 493.21 70 This approximation differs by $2.41 from the actual sample mean of $490.80. Slide 44 Variance for Grouped Data For sample data 2 f ( M x ) i i s2 n -1 For population data 2 f ( M m ) i i s2 N © 2005 Thomson/South-Western Slide 45 Sample Variance for Grouped Data Rent ($) 420-439 440-459 460-479 480-499 500-519 520-539 540-559 560-579 580-599 600-619 Total fi 8 17 12 8 7 4 2 4 2 6 70 Mi 429.5 449.5 469.5 489.5 509.5 529.5 549.5 569.5 589.5 609.5 Mi - x -63.7 -43.7 -23.7 -3.7 16.3 36.3 56.3 76.3 96.3 116.3 (M i - x )2 f i (M i - x )2 4058.96 32471.71 1910.56 32479.59 562.16 6745.97 13.76 110.11 265.36 1857.55 1316.96 5267.86 3168.56 6337.13 5820.16 23280.66 9271.76 18543.53 13523.36 81140.18 208234.29 continued © 2005 Thomson/South-Western Slide 46 Sample Variance for Grouped Data Sample Variance s2 = 208,234.29/(70 – 1) = 3,017.89 Sample Standard Deviation s 3,017.89 54.94 This approximation differs by only $.20 from the actual standard deviation of $54.74. © 2005 Thomson/South-Western Slide 47 End of Chapter 3, Part B © 2005 Thomson/South-Western Slide 48