Prepared by

Dr. Mohammad Bayezid Ali

Professor
Department of Finance
Jagannath University, Dhaka.
Chapter Objectives:
1. Defining the term ‘Statistics’
2. Basic Concepts in Statistics
3. Different Stages of Statistical Investigation
4. Features of Statistics
5. Functions of Statistics
6. Types of Statistics
7. Significance of Statistics
8. Limitations of Statistics
9. Abuses of Statistics
 1. Defining the term ‘Statistics’
Statistics is concerned with the scientific methods for
collecting, organizing, presenting, analyzing, and
interpreting numerical or sample data as well as drawing
valid conclusions about population characteristics and
making reasonable decisions on the basis of such analysis.
The term ‘statistics’ conveys different meanings to different
people in different situations.
➢ In one sense, statistics means a scientific discipline or a subject just like
applied physics, mathematics etc.
➢ In another sense, statistics means statistical data.
➢ However, statistics also implies estimated values from the statistical
data.
Examples of Statistics:
➢ The average stating salary of college graduates
➢ The percentage of under graduates (BBA Students)
attaining Jagannath University who will attend graduate
school (MBA Program).
➢ The average number of deaths due to road accidents in
the last 10 years.
➢ The mean time waiting for technical support of UPS
after electricity has gone.
 2. Basic Concepts: Population versus Sample
Population: An aggregate of all individual or items (actual or
possible) defined on some characteristics is called a
population. For example: first semester BBA students in the
Department of Finance at Jagannath University constitute a
population. Here, the common characteristics are:
i. Students of the Department of Finance at Jagannath University
ii. Students of first semester in BBA Program

Sample: A small but representative part with finite number of

individuals or items of a population is called a sample. For
example: A group of students, representing the first
semester BBA students, is called a sample.
(n)

(N)
 Population Sample
1. An aggregate of all individual or 1. A small but representative part with
items defined in some common finite number of individuals o items
characteristics is called population of a population is called a sample.
2. It may be finite or infinite. 2. A sample is always finite.
3. The statistical constant of 3. The statistical measures obtained
population are usually referred to as from the sample observations has
parameters. been termed as statistics.
4. Population size is always greater 4. Sample size is always smaller than
than the sample size. the sample size.
5. Census survey deals with the 5. Sample survey deals with the
population. sample.
6. Population is considered as a 6. Sample is a subset of the
universal set. population.
7. Capital letters are used to denote 7. Small letters are used to denote
population size usually by N. population size usually by n.
Census is the statistical technique of collecting data on
each and every item of the population. For example:
population census, census of the tigers in Bangladesh.
Sampling represents the techniques of drawing samples.
It is the technique of choosing a part of the population in
order to draw conclusions about the entire population.
Parameters represents estimated values based on census
data. For example: population mean, variance etc.
Statistics represents estimated values based on sample
data. For example: sample mean, variance etc.
 Variable: A variable is a measurable quantity which can
assume any of a prescribed set of values, called the domain of
the variable. Thus the height of a person, the yield of a crop,
the price of a commodity, and the number of children in a
family are some examples of variables.
 Constant: The term constant refers to a property whereby
the numbers of a group or category remain fixed or do not
differ one from another.
Types of Variable
Variables may be either qualitative or quantitative:
Qualitative Variable: It is one for which numerical measurement
is not possible, such a hair color (brown, black, white etc.) religion
(Muslim, Hindu, Christian etc.)
Quantitative Variable: It is one for which the resulting
observations are numeric and thus possesses a natural ordering.
Example of such variable include height, weight, family size, age,
number of accidents etc.
Attribute: The distinct categories of qualitative variables are
sometimes called attribute. In other words, the charactristics used
to classify an individual into different categories are called attribute.
A worker reported to be smoking is attributable to the category
smoker.
 Types of Quantitative Variable
Quantitative variables can be classified as either discrete or
continuous.
A. Discrete variables can only assume certain or isolated
values is called a discrete variable.
EXAMPLE: the number of bedrooms in a house, or the
number of hammers sold at the local Home Depot
(1,2,3,…,etc.).

B. Continuous variable can assume any value within a

specified range.
EXAMPLE: The pressure in a tire, the weight of a pork
chop, or the height of students in a class.
Measurement: Measurement is a process of assigning
numbers to some characteristics or variables or events
according to scientific rules. There are four types of
measurement scale:
The Nominal Scale of measurement is characterized by
data that consists of names, levels, or categories only. The
data can not be arranged in an ordering scheme. For
example eye color, gender, religious affiliation etc.
Data are at the Ordinal level of measurement if they can
be arranged in some order, but the differences between
data values either cannot be determined or are
meaningless. For example eye color, gender, religious
affiliation etc.
The interval scale of measurement is like the ordinal
level, with the additional property that the difference
between any two data values are meaningful. However,
data at this level do not have a natural zero starting point.
For example: temperature on the Fahrenheit scale,
years etc.
The ratio level measurement is the interval level with
the additional property that there is also a natural zero
starting point. For values at this level, differences, and
ratios are both meaningful. For example: monthly
income of surgeons, or distance traveled by
manufacturer’s representatives per month.
3. Different Stages of Statistical Investigation:
According to the definitions, statistical investigation
involves with five different stages:
1. Collection: Collection of data is the first step in a
statistical investigation. Utmost care must be exercised
in collecting data because they form the foundation of
statistical analysis.
2. Organization: Data collection from published sources
are generally organized form. However, large mass of
data that are collected from the survey frequently needs
organization.
Different Stages of Statistical Investigation:
3. Presentation: After the data have been collected and
organized they are ready for presentation. Data presented
in an orderly manner facilitates statistical analysis.
4. Analysis: After collection, organization and presentation,
the next step is to analysis the data for the respective
purposes. Different types of statistical can be applied like
calculating descriptive statistics, correlation, regression
etc.
5. Interpretation: This stage deals with drawing conclusions
from the data that has been analyzed. The interpretation
of data is a difficult task and necessitates a high degree of
skill and experience.
4. Features of Statistics:
1. Statistics are aggregate of facts.
2. Statistics are affected to a marked extent by
multiplicity of causes.
3. Statistics are numerically expressed.
4. Statistics are enumerated or estimated according
to reasonable standard of accuracy.
5. Statistics are collected in a systematic manner.
6. Statistics are collected for a predetermined
purposes.
7. Statistics should be placed in relation to each
other.
 5. Functions of Statistics
1. It Presents Facts in a Definite Form: Numerical expressions
are convincing and, therefore, one of the most important
functions of statistics is to present general statement in a
precise and definite form.
2. It Simplifies Mass of Figure: It also helps in condensing
mass of data into few significant figures and estimates.
3. It Facilitates Comparison: It also helps to compare one
statistical estimates with other which ultimately lead to a
meaningful result.
5. Functions of Statistics cont….
4. It Helps in Formulating and Testing Hypothesis:
Statistical methods are extremely useful in formulating
and testing hypothesis and to develop new theories.
5. It Helps in Prediction: Statistical methods provide
helpful means of forecasting future events.
6. Formulating Policies: Statistics provide basic materials
for framing suitable policies.
 6. Types of Statistics: 2 Types
1. Descriptive Statistics – It deals with graphical and
numerical procedures that summarizes and process data
and are used to transformed data into information.
EXAMPLE 1: A Graphical presentation of Per Capita GDP
of Bangladesh from 2000-2012.
EXAMPLE 2: The Average rainfall of Bangladesh during
1990-2010.
2. Inferential Statistics: A decision, estimate, prediction, or
generalization about a population, based on a sample.
EXAMPLE 1: The correlation between real GDP and
aggregate consumption is statistically significant at 5
percent level.
7. Significance of Statistics:
Our business world is dynamic, uncertain, numerically
oriented, risky and affected by multiplicity of causes.
Statistics helps in making appropriate decisions in an
uncertain, numerically oriented and risky business
world. It also helps in in identifying the factors that
influences on the achievement status. In brief, statistics
helps for any business personnel in the following ways:
1. Understanding the existing business scenario.
2. Estimating the frequency of occurrence of various
business parameters.
3. Arranging the data into different groups according to the
characteristics of inherent data.
 Significance of Statistics cont…
4. Assessing the business dynamics, i.e. revealing trend and
tendencies of the various business parameters.
5. Finding out the interrelationship that exits between or
among the variables.
6. Identifying the influencing factors.
7. Forecasting the future level of the business.
8. Planning the future activities
 8. Limitations of Statistics
Statistics has a number of limitations, pertinent among them
are as follows:
(i) There are certain phenomena or concepts where
statistics cannot be used. This is because these
phenomena or concepts are not amenable to measurement.
For example, beauty, intelligence, courage cannot be
quantified. Statistics has no place in all such cases where
quantification is not possible.
Limitations of Statistics
(ii) Statistics reveal the average behavior, the normal
or the general trend. An application of the 'average'
concept if applied to an individual or a particular
situation may lead to a wrong conclusion and sometimes
may be disastrous. For example, one may be misguided
when told that the average depth of a river from one bank
to the other is four feet, when there may be some points
in between where its depth is far more than four feet. On
this understanding, one may enter those points having
greater depth, which may be hazardous.
Limitations of Statistics
(iii) Since statistics are collected for a particular
purpose, such data may not be relevant or useful in
other situations or cases. For example, secondary data
(i.e., data originally collected by someone else) may not be
useful for the other person.
(iv) Statistics are not 100 per cent precise as is
Mathematics or Accountancy. Those who use statistics
should be aware of this limitation.
 Limitations of Statistics
(v) In statistical surveys, sampling is generally used as it
is not physically possible to cover all the units or elements
comprising the universe. The results may not be appropriate
as far as the universe is concerned. Moreover, different
surveys based on the same size of sample but different
sample units may yield different results.
(vi) At times, association or relationship between two or
more variables is studied in statistics, but such a
relationship does not indicate cause and effect‘ relationship.
It simply shows the similarity or dissimilarity in the
movement of the two variables. In such cases, it is the user
who has to interpret the results carefully, pointing out the
type of relationship obtained.
 8. Misuse of Statistics
Many people, knowingly or unknowingly, use statistical data in wrong
manner. The misuse of Statistics may take several forms some of
which are explained below.
(i) Sources of data not given: At times, the source of data is not
given. In the absence of the source, the reader does not know
how far the data are reliable. Further, if he wants to refer to the
original source, he is unable to do so.
(ii) Defective data: Another misuse is that sometimes one gives
defective data. This may be done knowingly in order to defend one's
position or to prove a particular point. This apart, the definition
used to denote a certain phenomenon may be defective. For
example, in case of data relating to unemployed persons, the
definition may include even those who are employed, though
partially. The question here is how far it is justified to include
partially employed persons amongst unemployed ones.
Misuse of Statistics
(iii) Unrepresentative sample: In statistics, several times
one has to conduct a survey, which necessitates to choose
a sample from the given population or universe. The
sample may turn out to be unrepresentative of the
universe. One may choose a sample just on the basis of
convenience. He may collect the desired information
from either his friends or nearby respondents in his
neighborhood even though such respondents do not
constitute a representative sample.
Misuse of Statistics
(iv) Inadequate sample: Earlier, we have seen that a
sample that is unrepresentative of the universe is a major
misuse of statistics. This apart, at times one may conduct
a survey based on an extremely inadequate sample. For
example, in a city we may find that there are 1, 00,000
households. When we have to conduct a household
survey, we may take a sample of merely 100 households
comprising only 0.1 per cent of the universe. A survey
based on such a small sample may not yield right
information.
Misuse of Statistics
(v) Unfair Comparisons: An important misuse of statistics is
making unfair comparisons from the data collected. For instance,
one may construct an index of production choosing the base year
where the production was much less. Then he may compare the
subsequent year's production from this low base. Such a
comparison will undoubtedly give a rosy picture of the
production though in reality it is not so. Another source of unfair
comparisons could be when one makes absolute comparisons
instead of relative ones. An absolute comparison of two figures,
say, of production or export, may show a good increase, but in
relative terms it may turnout to be very negligible. Such a
comparison is wrong.
 Misuse of Statistics
(vi) Unwanted conclusions: Another misuse of statistics may be
on account of unwarranted conclusions. This may be as a result
of making false assumptions. For example, while making
projections of population in the next five years, one may assume
a lower rate of growth though the past two years indicate
otherwise. Sometimes one may not be sure about the changes in
business environment in the near future. In such a case, one may
use an assumption that may turn out to be wrong. Another
source of unwarranted conclusion may be the use of wrong
average. Suppose in a series there are extreme values, one is too
high while the other is too low, such as 800 and 50. The use of an
arithmetic average in such a case may give a wrong idea. Instead,
harmonic mean would be proper in such a case.
Misuse of Statistics
(vii) Confusion of correlation and causation: In
statistics, several times one has to examine the
relationship between two variables. A close relationship
between the two variables may not establish a cause-and-
effect-relationship in the sense that one variable is the
cause and the other is the effect. It should be taken as
something that measures degree of association rather
than try to find out causal relationship..
End of Chapter 1