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Chapter 5
The Lure of Statistics:
Data Mining Using Familiar Tools
Note: Included in this Slide Set is a subset of Chapter
5 material and additional material from the instructor.
Why a Manager (or you) Needs to
Know Some Basics about Statistics
• To know how to properly present
information
• To know how to draw conclusions about
populations based on sample information
• To know how to improve processes
• To know how to obtain reliable forecasts
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Statistics vs Data Mining
• For statisticians, data mining has a negative connotation
– one of searching for data to support preconceived
ideas
• Statistics don’t lie but liars use statistics!
• Statistics developed as a discipline to help scientists
make sense of observations and experiments, hence the
scientific method
• Problem has often been too little data for statisticians
• DM is faced with too much data
• Many of the techniques & algorithms used are shared by
both statisticians and data miners
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Some Definitions
• Population (universe) is the collection of
things under consideration
• Sample is a portion of the population
selected for analysis
• Statistic is a summary measure computed
to describe a characteristic of the sample
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Some Definitions*
• Mean (average) is the sum of the values divided by the
number of values
• Median is the midpoint of the values (50% above; 50%
below) after they have been ordered from the smallest to
the largest, or the largest to the smallest
• Mode is the value among all the values observed that
appears most frequently
• Range is the difference between the smallest and
largest observation in the sample
* laymen’s
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Population and Sample
Population
Sample
Use statistics to
summarize features
Use parameters to
summarize features
Inference on the population from the sample
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Occam’s Razor – “Kiss”
• William of Occam, Franciscan monk,
1280-1349 – prior to modern statistics, the
Renaissance and the printing press.
• Influential philosopher, theologian,
professor with a very simple idea:
– Latin: Entia non sunt multiplicanda sine
necessitate
– English: The simpler explanation is the
preferable one or “Keep it simple, stupid!”
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The Null Hypothesis
• The NH assumes that differences among
observations are due simply to chance
• Bush vs Kerry – poll’s margin of error ~ 3% - 4%
• Layperson asks, “Are these %’s different?”
• Statistician asks, “What is the probability that
these two values are really the same?”
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Skepticism
• Is good for both statisticians and DMiners
• Goal for both is to demonstrate results that
work, hence discounting the null
hypothesis
• The less reliance on chance the better
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P-Values and Q-Values
• The null hypothesis can be quantified
• The p-value is the probability that the null
hypothesis is true
• When the null hypothesis is true, nothing is
really happening; differences are due to chance
• Confidence, the reverse of a p-value, is called
the q-value. p-value = 5% then the q-value
(confidence) is 95%.
• Example: Bush/Kerry…p-value 60% or 5%
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Data Visualization
• Discrete data, such as products, channels,
regions, and descriptions is the main focus of
data mining
• Histogram – bars show number of times
different values occur
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Data Visualization
• Histograms describe a single moment in time
• Data mining is often concerned with what is
happening over time.
• Time Series Analysis – choosing an
appropriate time frame to consider the data
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Standardized Values
• Time Series charts are useful, but have
limitations also; cannot tell whether the
changes over time are expected or
unexpected
• We could look at a segment of the data,
say a day at a time asking: “Is it possible
that the differences seen on each day are
strictly due to chance?” (null hypothesis)
• Answer: calculate the p-value for a day
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Central Limit Theorem
• As more and more samples are taken from
a population, the distribution of the
averages of the samples follows the
normal distribution. The average of the
samples comes arbitrarily close to the
average of the entire population.
• Normal distribution is described by the
mean (average count) and the standard
deviation (clustering around the mean)
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Different Shapes of Distributions
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Variance and Standard Deviation
• Variance is a measure of the dispersion of
a sample (or how closely the observations
cluster around the mean [average])
• Standard Deviation, the square root of
the variance, is the measure of variation in
the observed values (or variation in the
clustering around the mean)
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Example: Sample Scores/Grades
•
•
•
•
•
•
•
•
84
65
74
72
85
65
96
30
•
•
•
•
•
•
•
•
•
•
78
72
85
64
65
96
15
72
73
85
1. Sort the data from
highest to lowest and
assign grades
2. Find the Mean, Median,
Mode, and Standard
Deviation
3. Create a histogram for
the grades
.
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Using MS Excel…
B
Sorted
Raw Data
96
96
85
85
85
84
78
74
73
72
72
72
65
65
65
64
30
15
C
Grade
A
A
B
B
B
B
C
C
C
C
C
C
D
D
D
D
F
F
D
(Bx-I5)^2
630.57
630.57
199.12
199.12
199.12
171.90
50.57
9.68
4.46
1.23
1.23
1.23
34.68
34.68
34.68
47.46
1671.90
3123.57
E
F
G
H
I
Range
Mean
Median
Mode
Standard Deviation
A's
B's
C's
D's
F's
W's
Sum
81
70.9
72.5
85
19.8
2
4
6
4
2
0
18
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Using MS Excel…
Grade Distribution
7
6
5
4
3
2
1
0
A's
B's
C's
D's
F's
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End of Chapter 5
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