Quantitative Methods

DR. ZAHRA SADEGHINEJAD

Introduction to descriptive Statistics

Mean & Standard deviation

 Variance
Variance is the average squared deviation
from the mean of a set of data. It is used to
find the standard deviation.
Variance
1. Find the mean of the data.
Hint – mean is the average so add up the
values and divide by the number of items.

2. Subtract the mean from each value – the

result is called the deviation from the mean.
3. Square each deviation of the mean.
4. Find the sum of the squares.
5. Divide the total by the number of items.
 Variance Formula
The variance formula includes the
Sigma Notation,  , which represents
the sum of all the items to the right
of Sigma.
 (x   ) 2

n
Mean is represented by and n is
the number of items.
 Standard Deviation
Standard Deviation shows the variation in
data. If the data is close together, the standard
deviation will be small. If the data is spread
out, the standard deviation will be large.

Standard Deviation is often denoted

by the lowercase Greek letter sigma, . 
Standard Deviation Formula
The standard deviation formula can be represented using
Sigma Notation:

  ( x   ) 2

Notice the standard deviation formula is the

square root of the variance.
 Find the variance and
standard deviation
The math test scores of five students are:
92,88,80,68 and 52.
1) Find the mean: (92+88+80+68+52)/5 = 76.
2) Find the deviation from the mean:
92-76=16
88-76=12
80-76=4
68-76= -8
52-76= -24
 Find the variance and
standard deviation
3) Square the deviation from the
mean: (16)  256
2

(12)  144
2

(4)  16
2

(8)  64
2

(24)  576
2

4) Find the sum of the squares of the deviation

from the mean:
256+144+16+64+576= 1056
 Find the variance and
standard deviation
5) Divide by the number of data items to find the
variance:
1056/5 = 211.2
6) Find the square root of the variance:
211.2  14.53

Thus the standard deviation of the test

scores is 14.53.
 Standard Deviation

A different math class took the

same test with these five test
scores: 92,92,92,52,52.

Find the standard deviation for

this class.
Hint:
1. Find the mean of the data.
2. Subtract the mean from each value
– called the deviation from the
mean.
3. Square each deviation of the mean.
4. Find the sum of the squares.
5. Divide the total by the number of
items – result is the variance.
6. Take the square root of the
variance – result is the standard
deviation.
 The math test scores of five students
are: 92,92,92,52 and 52.
1) Find the mean: (92+92+92+52+52)/5 = 76
2) Find the deviation from the mean:
92-76=16 92-76=16 92-76=16
52-76= -24 52-76= -24
3) Square the deviation from the mean:
(16)2  256(16)2  256(16)2  256
  
4) Find the sum of the squares:
256+256+256+576+576= 1920
 The math test scores of five
students are: 92,92,92,52 and 52.

5) Divide the sum of the squares

by the number of items :
1920/5 = 384 variance
6) Find the square root of the variance:
384  19.6
Thus the standard deviation of the
second set of test scores is 19.6.
 Analyzing the data:

Consider both sets of scores. Both classes have the same mean, 76. However,
each class does not have the same scores. Thus we use the standard deviation to
show the variation in the scores. With a standard variation of 14.53 for the first
class and 19.6 for the second class, what does this tell us?
 Analyzing the data:

Class A: 92,88,80,68,52
Class B: 92,92,92,52,52

With a standard variation of 14.53 for the first class and 19.6
for the second class, the scores from the second class would be
more spread out than the scores in the second class.
 Analyzing the data:

Class A: 92,88,80,68,52
Class B: 92,92,92,52,52
Class C: 77,76,76,76,75

Estimate the standard deviation for Class C.

a) Standard deviation will be less than 14.53.
b) Standard deviation will be greater than 19.6.
c) Standard deviation will be between 14.53
and 19.6.
d) Can not make an estimate of the standard deviation.
 Analyzing the data:

Answer: A
The scores in class C have the same mean of 76 as the
other two classes.
However, the scores in Class C are all much closer to the mean
than the other classes so the standard deviation will be
smaller than for the other classes.
 Summary:
As we have seen, standard deviation measures the dispersion
of data.

The greater the value of the

standard deviation, the further the
data tend to be dispersed from the
mean.
The purpose of most statistical investigations is to
generalize from information contained in random
samples about the populations from which the
samples were obtained.

How: estimation (Lecture 3)

and tests of Hypothesis (Lecture 4)
 Statistical Methods
Statistical
Statistical
Methods
Methods

Descriptive
Descriptive Inferential
Inferential
Statistics
Statistics Statistics
Statistics

Hypothesis
Hypothesis
Estimation
Estimation Testing
Testing
 Estimation…
The use of sample information to draw conclusions about the population is known as
inferential statistics.

The objective of estimation is to determine the approximate value of a population

parameter on the basis of a sample statistic.

E.g., the sample mean ( ) is employed to estimate the population mean ( ).

Sample standard deviation (s) is the best point estimate for population standard
deviation (σ )

10.22
 Estimation Methods

Estimation

Point Interval
Estimation Estimation
 Estimation…
The objective of estimation is to determine the approximate value of a population
parameter on the basis of a sample statistic.

There are two types of estimators:

Point Estimator

Interval Estimator
 Point Estimator…
A point estimator draws inferences about a population by estimating the value of an
unknown parameter using a single value or point.
 Interval Estimator…
An interval estimator draws inferences about a population by estimating the value of an
unknown parameter using an interval.

That is we say (with some ___% certainty) that the population parameter of interest is
between some lower and upper bounds.

10.26
 Point vs. interval estimate

While the point estimate is a single number that estimates the exact value of the
population parameter of interest, an interval estimate includes a range of possible values
that are likely to include the actual population parameter.

When the interval estimate is associated with a degree of confidence that is actually
includes the population parameter, it is referred to as a confidence interval.

Confidence interval: an interval estimate for which there is a specified degree of

certainty that the actual value of the population parameter will fall within the interval.
 Point & Interval Estimation…

For example, suppose we want to estimate the mean summer income of a class of business
students. For n=25 students,
is calculated to be 400 $/week.

point estimate interval estimate

An alternative statement is:

The mean income is between 380 and 420 $/week.

10.28
 Point estimation of a mean
Parameter: Population mean 
Data: A random sample
X1 , X 2 , , Xn

Estimator:
X
Estimate of standard error (standard deviation): S
n
 EX of point estimation

Scientists need to be able to detect small amounts of contaminants in the environment.

Sample data is listed as follows:
2.4 2.9 2.7 2.6 2.9 2.0 2.8 2.2 2.4 2.4 2.0 2.5
 EX

Compute the point estimator X and estimate its standard deviation (also called the
estimated standard error of ).
X

Solution: n

29.8
x  2.483
12
n n

 ( xi  x ) 2
i
x 2
 nx 2
75.08  (29.8)2 /12
s2  i 1
 i 1
  0.09788
n 1 n 1 12  1
s
Hence the estimated standard deviation is  0.09788 /12  0.090
n
 Interval Estimation

Sample statistic
Confidence
(point estimate)
interval

Confidence Confidence
limit (lower) limit (upper)
 Confidence Interval Estimator for :
Usually represented upper confidence
with a “plus/minus” limit (UCL)
( ± ) sign

lower confidence
limit (LCL)

10.33
 Confidence Interval Mean

Assumptions
◦ Population standard deviation is known
◦ Population is normally distributed
◦ If not normal, can be approximated by normal distribution (n  30)
Confidence Interval Estimate

 
X  Z / 2     X  Z / 2 
n n
 Four commonly used confidence levels…
Confidence Level
 cut & keep handy! 
 Example

A computer company samples demand during lead time over 25 time periods:

235 374 309 499 253

421 361 514 462 369
394 439 348 344 330
261 374 302 466 535
386 316 296 332 334
It’s known that the standard deviation of demand over lead time is 75 computers. We want to
estimate the mean demand over lead time with 95% confidence in order to set inventory
levels…

10.36
 Example
“We want to estimate the mean demand over lead time with 95% confidence in order to set
inventory levels…”

IDENTIFY

Thus, the parameter to be estimated is the pop’n mean:

And so our confidence interval estimator will be:

10.37
 CALCULATE

In order to use our confidence interval estimator, we need the following pieces of data:

370.16 Calculated from the data…

1.96

75
Given
n 25

therefore:

The lower and upper confidence limits are 340.76 and 399.56.

10.38