REP en ee MAR GREG OF ARTS & SCIENCE Block No.8, College Road, Mogappair West, Chennai — 37 Affiliated to the University of Madras Approved by the Government of Tamil Nadu An ISO 9001:2015 Certified Institution DEPARTMENT OF COMMERCE SUBJECT NAME: BUSINESS STATISTICS SUBJECT CODE: CDZ3A SEMESTER: III PREPARED BY: PROF. B. HARISWARAN[J To facilitate the understanding of the relevance and need of the Statistics in the Current Scenario. [05 To Customize the importance of Business Statistics for the Commerce Students. UNIT- Lntroduction Meaning and Definition of Statistics ~ Collection and Tabulation of Statistical Data - Presentation of Statistical Data - Graphs and Diagrams Measures of Central Tendency - Arithmetic Mean, Median, Mode, Harmonic Mean and Geometric ‘Mean. Measures of Variation - Standard deviation - Mean Deviation - Quartile Deviation - Skewness and Kurtosis- Lorenz Curve Simple Correlation - Scatter Diagram - Karl Pearsons Correlation - Spearman's Rank Correlation - Regression Meaning - Linear Regression. unrr-1w Tif Analysis of Time Series - Causes of variation in Time Series Data - Components Of Time series; Additive and multiplicative models - Determination of Trend by Semi average, Moving average and Least squares (Linear, Second degree and Exponential) Methods - Computation of Seasonal indices by ‘Simple average, Ratio-to-moving average, Ratio-to Trend and Link relative methods UNIT-YV Index Numbers Meaning and Types of Index numbers - Problems in Construction of Index numbers - Methods of Construction of Price and Quantity indices - Tests of adequacy = Erfors in Index numbers - Chain Base Index numbers - Base shifting - splicing - deflating - Consumer Price index and its uses - Statistical Quality ControlINTRODUCTION ‘The word ‘Statistics * is derived from a Latin term “Status” or Italian term ‘Statistics’ or the German term ‘Statistick” is the French term ‘Statistique’ each of which means a political state, The term statistics was applied to mean facts and figures and figures which were needed the state in respect of the division of the state, their respective population birth rate, income and the like. Statistics Meaning: The term ‘Statisti¢s’ is conveyed to two different things, In the plufal use, statistics means some systematic collection of numerical data about some particular topic. In the Singular use, it means the science of statistics. In the general practice, statistics is used to mean the science of statistics and data or statistical data used for the numerical variables. Statistics — Definition “Statistics are numerical statement of facts in any department of enquiry placed in relation to each other”. — A.L.Bowley. “Statisties may be defined as the science of collections presentation, analysis and interpretationof numerical data” - Croxton and Cowden. Characteristics of statistics Aggregate of fact’s Statistical enquiry is to get information from a mass of observation with regards to the group behavior of individual items. For example, the aggregate of figures related to production, sale and profit over different times is called statistics. Numerically expressed ‘Numerical expression of the observed fact in terms of quantitative standards of particular scores could be regarded as statistics. Estimated ‘The numerical data pertaining by field of enquiry can be observed either by enumerating or by estimation. Enumeration is used for sell field of enquiry while estimation is used for wide and large field of enquiry.Standard of Accuracy In case of enumeration and estimation, it is essential to fix the desired standard of accuracy beforehand. Predetermined purpose The purpose of enquiry is specifically stated, and then the data should be collected in a systematic manner through some suitable plan, so as to make the figures free from bias and errors. Comparability The ultimate aim of statistical data is, for the purpose of the comparative or relative study. Therefore, it is homogeneous to make valid comparison. Objective of statistics To improve the unknown and to cast light upon the statistics out of facts and figures To enable comparison to be make between past and present To throw light on the reasons of changes, effects of changes and plans for future To handle analyze and draw valid inferences. To help to drawing conclusion from facts effected by a multiplicity of causes Importance / Scope of Statistics / Application of Sta in various, fieldsin States Statistics was regarded as the “Science of Kings”, It supplies the essential information to run the government; Policies are adopted by the government with the help of statistics. In economic In economies, the problems are studied by the use of statistical methods economic lossis, based on the study of collected statistical data. The loss economics refer to statistics to prove their accuracy, Statistics in economics as given birth to a new discipline called econometric: In Business In the competitive business, the business people face some like shortage is overstocking, uneconomic crisis etc., which can be solved through statistical analysis. To a greater extent statistics help the businessman maximize their profit. In Education Statistics is widely used in education for research purpose. It is used to test the past knowledge and evolved new knowledge. In Astronomy Astronauts study the eclipse and astronocal issues by applying statistics. They rely on estimation in many cases and it was corrected with the help of statistics. In accounting correlation analysis between profit and sales is widely used. In auditing, Sampling techniques are commonly followed.In Banking In this past developing technology, the banking sectorneeds a lot of information about the present and future business development. In Investment Decision Statistics helps an investors in selecting securities, which are safe, yielding a good return an appreciation in the market price. In Insurance Statistics is extensively used in the field of Insurance. Actuarial statistics is must of theinsurancecompany through fix the premium relates which is based on the mortality tables. Market researchers largely depends upon statistical methods in drawing conclusion In management Statistical tools are used widely by business enterprises for the promotion of new business. It also helps in the assessment of quantum of product to be manufactured, the amount of raw material, labor needed, marketing avenues for the product and the competitive products in the market and so on, In Industry In Industry staties is used in quality control through control charge which has its basis on the theory of probability, normal distribution and inspection, which are based on sampling techniques, In Medical sciences In medical sciences, the test of significance by student T test for testing the efficiency of new drug, injection for controlling and curing specific ailments is done carried out by statistics. Comparative study for the effectiveness of different medicine by different concerns can also be also be made by statistical techniques of T & F test of significance In War The theory of decision functions propounded by A.Wald can be of great assistance tothe military and technical personnel to plan maximum destruction with minimum effort. Moreover, the statistical data obtained in the post war period reveal some useful information for planning future military strategies. Functions of Statistics It prevents facts in a definite numerical form It simplifies the complexity of the data It provides a technique of comparison Ithelps in formulation and testing hypothesis It helps in forecasting of future trends and tendencies It studies relationship It helps the governmentLimitation of statistics Statistics cannot be applied to individual term Statistical study qualitative phenomena in indirect form Statistical law are not exact Statistical results are uncertain Statistics is not simple Statistical data may be incomparable Statistics is liable to be misused Collection of Data Meaning Data Collection means the assembling for the purpose of a particular investigation of entirely new data, presumably nor available in published sources Data: meaning Data refer to the facts, figures or information collected for a specific purpose Types of Data Primary data, & Secondary data Choice between Primary and Secondary Data ‘Nature and scope of the enquiry Availability of financial resources Availability of time Degree of accuracy designed Collecting agency Primary Data Primary data are new and original in nature which are firsthand information generatedto achieve the purpose of the research Advantages of Primary data > First and new information » More reliable > Formulated int such a manner, which best suits the purpose Methods of collection of Primary DataExpeFiméntiMigthod Here the researcher examines the truth contained in his hypotheses by conducting experiments, through which the date are collected. Survey Method Under this method, data can be collected by any one or more of the following ways: A) Observation method This method refers to the collection of information by way of investigator's ownobservation without interviewing the respondents, B) Interview Method In the interview method, a lot of questions relation to the proposed study is prepared and the answer for these questionnaires obtained from the respondents, C) Mailed Questionnaire method Under this method, the questionnaire is sent to the respondents with a covering letter to fill up the questionnaire and send back within a specified time. D) Through Schedules Under this method, enumerators are appointed and trained .Who will take the questionnaire to the respondents and fill the answer to the questions, obtained from the respondents Secondary data Secondary data are not new and original in nature which are obtained from published and or unpublished sources Sources of Secondary Data > Published Sources >» Un published Sources Classification’and tabulation Meaning Classification is the process of arranging the data under various understandable homogeneous ‘groups for the purpose of convenient interpretation, The grouping of data is making on the basis of common characteristics Definition The process of grouping a large number of individual facts or observations on the basis of similarity among the items is called classification, - Stactor and Clark Characteristics of classification > All facts can be arranged into homogeneous groups, > Classification may be according to their resemblances and affinities > Classification may be made on either actuality or nationality > Going expression to the unity of attributes > It should be flexible to accommodate adjustment Objectives of classification To facilitate comparison To study the relationship To trace location of important facts at a glance To eliminate unnecessary details To effect statistical treatment of the collected data> To facilitate easy interpretation Significance of classification > It is helpful to tabulation > It leads to a valid result > It makes interpretation clear and meaningful ‘Types of Classification Geographical Classification In this type the data are classified on the basis of geographical locational differencesamong various items on the basis of states districts, cities, regions, and the like Chronological Classification Under this type data are classified in them basis of differences in time or period such astainfall for 12 months. Qualitative Classification In this classification, data are classified on the basis of some attributes or qualitativephenomena| such as religion, sex, marital status, literacy, occupation and the like. Quantitative Classification Under this type data are classified according to some quantitative phenomena capable of quantitative measurement such as age, experience, income, prices, production, sales and thelike Frequency Distribution Frequency distribution is the process or method in simplify mass of data into grouped form of classes-and the member of items in such class is recorded a. Univaraite Frequency Distribution b. Bivariate Frequency Distribution a. Univariate Frequency distribution It is one way frequency single variable distribution and further classification into > Individual Observation > Discrete Frequency Distribution > Continuous Frequency Distribution b. Bivariate Frequency Distribution Bivariate Frequency Distribution is a two way Frequency distribution, where two variables are measured in the same set of items through cross distribution Tabulation Tribulation is a systematic arrangement of raw data in a compact form of historical Rows and vertical columnUses of tables > It simplifies the presentation > It facilitates comparison > Itis easier to distend the required information > Itreflects the trends and tendencies Parts of tables Table Number Title of the table Head Note Caption Body of the table Source Note Foot Note Diagrammatic and Graphic PresentationDiagrams and Graphs Diagrams and graphs are easy methods of understanding of data as they are a visual form of presentation of presentation of statistical data. Diagrams and attractive and useful to find out the result. Data should be simplified before presenting in the diagram. Two or more sets of data can be compared with the help of diagrams Diagrams provide moiré information than the table. Methods of Diagrams Points, lines, bars, squares, rectangles, circles cube and so on. Types of Charts Charts, pictures Maps and the like Advantages of diagrams ‘Visual form of presentationProvide attractive and Impressive view Save time and labour Made Comparison Easy Useful for production Provide more information Limitations of Diagrams and Charts Further analysis is not possible They show only approximate values Alll details cannot be presented diagrammatically and or graphically Construction of diagrams and graphs require some skill It is complementary in the table but not an alternative to it‘Types of Diagrams One dimensional diagram Two dimensional diagram Three dimensional diagram Pictogram Cartograms Bar Diagrams Bar is a thick wide line, Statistical data presented in the form of bar is called bar diagram, Simple but diagram is commonly used in business ‘Types of bar diagram > Simple bar diagram Percentage bar diagram Bilateral deviation bar diagram Multiple bar diagram Sub divided bar Diagram MEASURES OF CENTRAL TENDENCY Average Meaning Average is a single value that represents group of values Definition An Average is a value which a typical or representative of a net of data Characteristics of a Good Average > It should be defined clear and unambiguous so that it leads to one and only one interpretation by different persons > It should be easy to understand and simple to compute and should not involve heavy arithmetical calculations: > It should be based on all the items of the given set of data is compute the average. > It should besuitable for further algebras mathematical treatment and capable of being used is further statistical computations Uses of Average » Itis useful todescribe the distribution in a concise manner > It is useful to com pare different distributions> It is useful to comparevarious statistical measures such as dispersion, skewness, kurtos and soon Functions or An average > To facilitate Quick understanding of complex data > To facilitate Comparison > Itestablishes mathematical relationship > Capable of further statistical comparison ‘Types of Average > Mathematical Average > Location Average > Commercial Average ives of an Averaige > To get a single value that describe the features of the entire group > To provide ground for better comparison > To provide ground for further statistical computation and analysis Arithmetic Mean The arithmetic mean of a series of items is the sum of the values of all items divided by that total number. It is a multinational average and it is the most popular measure of central tendency Merits of Anti¢metic Mean > Easyto calculate and understand > Itis a perfect average, affect by the value of every item in the series > Itis calculated value and not based on position in the series ca It is determined by a rigid formula, Hence, everyone who computes the average gets the same answer tis used in further calculation It gives a good base for comparison Demerits of Arithmetic Mean > The mean is unduly affected by the extreme items > Itis unreliable Itmay lead to a false conclusion > It is not useful for the study of qualities > It cannot be located by the graphic method Arithmetic Meanindividual Seri Find our mean from the following data RollNo ]1 |2 3 Marks [21 | 30 8Solution: Roll No Marks (X) 2 30 28 26 34 9 15 17 EX =300 Formula = X =3X/N X =300/10 = 30. ‘The mean marks =30 Discrete Series Calculate the arithmetic mean for the wages of workersin a Factory Wages in Rs. 6 10 Workers 15 7 lution Wages in Rs. ix 4 6 8 10 15 16 4x5=20 6x15=96 8x6=48 10x7=70 15x8=120 16x2=32 YAK=380 X=YiK/N = 380, N=43 = 380 / 43 = 8.837The average wage of workers = Rs.8.84 Continuous Series Calculate Arithmetic Mean Class 0-10 10-20 Intervals Frequency Class Intervals Mid-point Frequency fim 0-10 5 6 10-20 15 5 15 20-30 25 8 200 30-40 35 15 525 40-50 45 7] 315 Nope Arithmetic Mean = X = =Sfim/N ‘The Arithmetic mean = 27.92 Median Median is the value of the middle item of a series arranged in ascending or descending order of magnitude, Hence it is the “Middle most” or “Most central” value of a set of number. It divide the series into two equal part, one part containing values. greater and the other with values less than the median. Meaning ‘The number is that value of the variablewhich divides the group into two equal parts, one part comprising all values greater and the other, all values less than median. Merits of Median: It is easy to compute and understand Iteliminates the effect of extreme item The value of median can be located graphically Demerits of Median ‘The calculating media, it is necessary to arrange the data other averages do not need an arrangement It is affected more by fluctuation of samplingthan the arithmetic mean. > It is not based on all the items of the series Individual Series Arrange the data either ascending or descending orderMedian ~ Size of N+1 th Ttem2 Find out the median from the following 37 58 6l a2 Data arranged in ascending order 38 42 37 58 62 65 66 R 80, Median= —Size of N+1 th Item: 2 = Size of 941 the item 2 =10/2 = S*item Median = 62 Discrete Series Compute the median for the following distribution of weeks of wagers of 65 employees of the xyz. company Weekly 55 65 785 85 95 105 Ws wages in Rs Number of employeesSolution Weekly wages in Rs No of Employees ‘Cumulative frequency (eH 55 8 65 10 15 16 85 14 95 10 105 5 15; 2 8 18 34 48 58 63 65 Median= -Sizeof N+1 coeenneeeth Tem, 2 = sizeof 65+ 1 ft = 337 which is nearer to 34 Cfof 34=75 Median weekly wages = 75 Continuous Series Calculate the median form the following data ‘Marks 0-20 20-40 No of Students 5 15 lution ‘Marks ‘No of students ‘Cumulative frequene; 0-20 5 20-40 15, 40-60 30 60-80 8 80-100 2 5 20 50 58 60 Median = —izeof N ~ th Item ¢ size of 60/2th Item x 20 = 46.47Median marks = 46.676 Mode ‘Mode is the modal value in the value of the variable which occurs more number of times or most frequently is a distribution, Mode is the value which occurs with the greatest number of frequency in a series ‘Types of modal 1. Uni-model If there is only one mode in series is called uni-model il, Bi-Modal If there are two modes in the series, it is called bi-model i. Tri-Modal If they are three modes in the series, it is Relationship between different Averages Symmetrical is called Tri-model. IV. Multimodal If there are more than three modes in the series itis called multi-mode. Relationship among mean, median and mode ‘The three averages are identical, when the distribution is symmetrical. In an asymmetricaldistribution, the values of mean, median and mode are not equal. Median = 1/3 (Mean - mode ) Mode = 2.median - 2 mode Median =Mode * 2/3 (Mean — Mode) Individual Series Calculate the mode form the following data of the marks obtain by 10 students Serial No| “Marks obtained Solution Marks obtained by 10 students is here 77 is repeated three times ‘Therefore the Mode mark is 77Discrete Series Calculate the mode form the following data of the wages of workers of are establishment. the modal wages [Daily 10 fiz is Iwagesin Solution Grouping Table Daily Frequency of Wages Wages Earners is 3 a Rs. Analysis Table:T 1 3 5 4 1 From the analysis table it is known that size10 has been repeated the maximum number of times, thus is, so the modal wages Rs10 Continuous series Find out the mode from the following series x 0-5 [5-10 | 10-15 | 15-20 frequency | 1 2 5 4 Modal value lies in 15-20 as it occurs most frequently fl - 0 Mode (Z) =L +. 2f1-f0- 2 Mode (z) = 154 +. 2(14)- 5 - 10 S15 + 9/13 X5 = 15 + 45/13 = 15 +346 Mode = 18.46 Geometric Mean Merits of geometric Mean » Every item in the distribution is included in the calculation > Itcan be calculated with mathematical exactness, provided that all the qualities are greater than zero and positive > Large items have less effect on it than in the arithmetic average. > Itis amenable to further algebraic manipulation Demerits of Geometric mean > Itis very difficult to calculate > It is impossible to use it when any item is zero or negative > The value of the geometric mean may not correspond with any actual value in the distributionUses of Geometric mean > This average is often used to construct index numbers, where we are chiefly concerned with relative changes over a period of time > Itis the only useful average that can be employed to indicate rate of have Individual series Tlog X G.M= Antiling of N Calculate Geometric Mean 50 72 Logt X 1.6990, 1.8573 1.7324 1.9238, 1.9685 Dog X GM = Anti ling of. =9.1710 _ = 1.8342 5 = Antilog of 1.8342 = 68.26 Discrete Series Calculate Geometric mean from the following data Sizeof [120 [125 | 130 ItemFrequency Solution: Flog x 4.1584 6.2907 6.3417 2.1303 4.2670 14,9793 8.5720 4.2922 17.3384, N=Sfllog x= 68.3700 i ling of Anti log of | 32 =‘Aiitilog of 2.1366 = 137 Therefore. G. Continuous series Geometric mean from the following data) Yield of | 7.54-10.5 | 10.5-13.5 | 13.5-16.5 | 165-195 22.5-25.5 | 25.5-28.5 wheat No of, formsSolution: Yield of wheat flogm 754-105 4.710 10.5-13.5 9.7128 13.5 -16.5 22.3459 16.5-19.5 28.8719 19.5-22.5 9.2554 22.5-25.5 5.5208 25.5-28.5 1.4314 Diflog m=! GM = Anti logof Sf logm N = 81.9092/68 = 1.204547 = Antilog of 1.204547 = 16.02 G.M = 16.02 Harmonic Mean Meaning Harmonic Mean is the reciprocal of the arithmetic average of the reciprocal of values of various item in the invariable Merits of Harmonic Mean It utilizes all values ofa variable It is very important to small values Itis amenable to further algebraic manipulation It provides consistent results in problems relating to time and rates than similar averages Demerits of Harmonic Mean > Itis not very easy to understand > The method of calculation is difficult> The presence of both positive and negative items in a series makes it impossible to compute its value. The samedifficulty is felt if one or more items are zero > Itis only a summary figure and may not be the actual item in the series. HM = Li Find out the Harmonic mean Family Income Solution Computation of Harmonic Mean Famil I/x 0.01176 0.01429 0.10000, 0.01333 0.00200, 0.12500, 0.02381 0.00400, 0.02500 0.02778 TIk= 0.34697 Dix = 10 /0,34697 = 28.82 H.M = 28.82 Discrete Series Size of Item FrequencySolution: Size of Item Ix Fix x 6 0.1667 0.6668 0.1429 0.8574 0.1250 1.1250 0.111 0.5555 0.1000 0.20000.7272 0.0909 Yhlk= 4.1319 Yel Continuous Series Compute Harmonic Mean Size (0-10 Frequency | 5 Solution, Size F(i/m) 0-10 1.00000 10-20 0.53336 20-30 0.48000 -30-40 0.17142 40-50 0.08888 Diiim= 2.27366 N HM = = = 15.393682 Yel/m 2.27366 Measures of Variation or Dispersion Meaning Dispersion is the study of scatterness around an average Definition Dispersion is the measures of the variation of the items ---A.L.Bowley_ Dispersion is a measure of extent to which the individual items vary ----L.R.Connor Importance of measuring variation or dispersion> Testing the Reliability of the Measures of Central Tendency > Comparing two or more series on the basis of their variability > Enabling to control the variability > Facilitating as a Basis for further statistical Analysis Characteristics of a Measure of Variation > Itis easy to understand and simple to calculate > It should be rigidly defined > It should be based on all observations and it should not be affected by extreme observations > It should be amenable to further algebraic treatment > It should have sampling stability Methods of Measuring Dispersion Range Range Inter Quartile range Quartile Deviation Mean Deviation Standard Deviation Lorenz Curve Range is the difference between the largest and the smallest value in the distribution. It is the simplest and crudest measure of dispersion. Uses of Range > Itis used in industries for the statistical quality control of the m infected product > Itis used to study the variations such as stock, shares and other commodi > It facilitates the use of other statistical measures Advantages of Range > Itis the simplest method of studying variation > tis easy to understand and the easiest to compute » Ittakes minimum time to calculate > Itis accurate Disadvantages of Range > Range is completely depended on the two extreme values > Itis subject to fluctuations of considerable magnitude from sample to sample > Itis not suitable for mathematical treatment > > It cannot be applied to open and classes Range cannot tell us anything about the character of the distributionQuartile deviation Quartile deviation is an absolute measure of dispersion. It is calculated on the basis ofthe difference of upper quartile and the lower Quartile divided by 2. In the series, four quartiles are there. By eliminating the lowest (25%) items and the highest (25%) items of a series, we can obtain a measure of dispersion and can find out half the distance between the first and the third quartiles. Q3 -Ql Quartile Deviation (Q.D) = 2 Co-efficient of QD = Q3-QI @+Q Merits of Quartile Deviation > Itis simple to calculate and easy to understand > Risk of extreme item variance is eliminated, as it depend upon the central 50 per cent items > It canbe applied to open and classes Demerits of quartile Deviation > Items below QI and above Q3 are ignored. > tis not capable of further mathematical treatment > Itis affected much by the fluctuations of sampling > Itisnot calculated from a computed average, but from a positional average. Mean deviation Mean deviation is the average difference between the items in a distribution computed from the mean, median or mode of that series counting all such deviation as positive. The mean deviation is also known as the average deviation Mean deviation =S1 DI N Co — efficient of Mean Deviation (M.D) =MD/ Mean or Median Merits of Mean Deviation > Itis clear and easy to understand > Itis based on each and every item of the data It can be calculated from any measure of central tendency and as such as flexible too.Demerits of mean Deviation It is not suitable for further mathematical processing Itis rarely used in sociological studies Itis mathematically unsound and illogical, because the signs are ignored in the calculation of mean deviation Standard deviation Standard deviation is the square root of the means of the stranded deviation from the Arithmetic mean. So, it is also known as Root Mean Square Deviation an Average of Second order. Standard deviation is denoted by the small Greek letter ‘o” the concept of standard deviation is introduced by Karl Pearson in 1893. Uses of Standard deviation It is used instatistics because it possesses must of the characteristies of an ideal measure of dispersion. 1 Itis widely used in sampling theory and by biologists. 1 Itis applied in co-efficient of correlation and in the study of symmetrical frequency distribution Advantages of standard deviation Itis rigidly defined determinate It is based on all the observations of a series tis less affected by fluctuations of sampling and hence stable Itis amenable to algebraic treatment and is less affected by fluctuations of sampling most other measures of dispersion The standard deviation is more appropriate mathematically than the mean deviation, since the negative signs are removed by squaring the deviations rather than by ignoring SKEWNESS Introduction The term “Skewness’ refers to lack of symmetry, that is, when a distributionis to symmetrical it is called a skewed distribution. It the curve us normal or the data distributed symmetrically or uniformly. Spread will be the same on both sides of the cent repoint and the ‘means median and mode will all have the same value. Definition ‘Skewness or symmetry is the attribute of a frequency distribution that extends furtheron one side of the class with the highest frequency on the other--- Simpson and Kafka When a series is not symmetrical it is said to be asymmetrical or skewed -Croxton and cowden Skewness of a Distribution When a distribution is not symmetrical itis called a skewed Distribution, ‘The analysis of presence of skewness in a distribution implies two main tasks. They are | Determination ofthe sign of skewness and testing of skewness andAbsolute measures of skewness i) The Karl Peason’s Coefficient of Skewness ii) The Bowley’s Co efficient of Skewness iii) The Kelly’s Coefficient of Skewness iv) Measure of Skewness based on moments Karl Pearson’s Co-efficient of Skewness ‘This method is based upon the difference between mean and mode and the differenceis divided by standard deviation to give a relative measures. Bowley’s Coefficient of Skewness Bowelys measure is based on quartiles, in a symmetrical distribution first and third quartiles are equidistant from the median. Objectives of Skewness 1). To find out the direction and extent of asymmetry in a series. lI) To compare'two or more series with regards to skewness, Ill) To study the nature of variation of the items about the central value. Graphic method of dispersionLorenz Curve Lorenz Curve is a device used to show the measurement of economic inequalities as in the distribution of income and wealth, It can also be used in business to study the disparities of distribution of profit, wages, turnover, production and the like. Correlation and Regression Analysis Meaning: Correlation is the study of the natural relationship between tWo or tore variables. Hence, that the detection and analysis of correlation between two statistical variables requires relationship of some sort which associates the observation in pairs each of which is a value of the two variables Definition ‘The relationship that exists between two variables -—-Smith Correlation analysis deals with the association between two or more variables.Uses of Correlation 1) Correlation is very useful in physical and social sciences. Business and economics 1) Correlation analysis is very useful in economies to study the relationship between priceand demand Ill) It is also useful in business to estimates costs, value, price and other related variables IV) Correlation is the basis of the concept of regression V) Correlation analysis help in calculation the sampling once. ‘Types of Correlation Positive correlation Negative Correlation Simple Correlation Multiple Correlations Partial Correlation Linear Correlation Non =Linear Correlation Positive Correlation Correlation is said to be positive when the values of two variables move in the same direction, so that an increase in the value of one variable is accompanied by an increase in the value of the other variable or a decrease in the value of one variable is followed by a decreasein the value of the other variable Negative Corrélation Correlation is said to be negative when the values of two variables move in opposite direction, so that an increase in the values of one variable is followed by a decrease in the valueof the other and vice-versa. Simple Correlation When only two variables are stated, itis said to be simple correlation Multiple Correlations When more than two variables are stated simultaneously, the correlation is said to be multiple Partial Correlation Partial correlation coefficient provides a measure of relationship between a dependentvariable and a particular independent variable when all other variables involved are keptconstant analysis to yield and rainfall; it becomes a problem relating to simple correlation Linear Correlation ‘The correlation is said to be linear, if the amount of change is one variable tends to beara constant ratio to the amount of change in the otherNon Linear Correlation The correlation is non linear, if the amount of change in one variable does not bear aconstant ratio to the amount of change in the other related variable. Methods of studying correlationGraphical method > Scatter diagram > Simple graph method Mathematical Methods » Karl Pearson’sCo-efficient of correlation > Spearman's Rank Correlation coefficient > Concurrent deviation method > Method of least square Scatter diagrart method It is.a method of studying correlation between two related variables. The two variablesX and Y will be taken upon the X and Y axes of a graph paper. For each part of X and'Y values, we mark a dot and we go as many points as the numbers of observation, Graphical method In this method curves are drawn for separate series on a graph paper. By examining the direction and closeness of the two curves we canofferwhether prompt variances are related. If both the curves are moving in the same direction correlation is said to be positive. On the contrary, if the curves are moving in the opposite directions is said to be negative Karl Pearson’s Co-efficient of correlation Karl Pearson, a great statistician introduced a mathematical method for measuring the magnitude of relationship between two variables. This method. Known as Pearson Coefficient of correlation is widely used, It is denoted by the symbol “r" Spearman’s Rank Correlation Co-efficient In 1904, a famous British psychologist Charles Edward Spearman found out the method of Co-efficient of correlation of rank. Rank correlation is applicable to individual observation. This measure is useful in dealing with qualitative characteristics. The result, by using ranking method, is only approximate.Regression Analysis Meaning The statistical method employed to estimate the unknown valued of one variable fromthe known value of the related variables is called regression Definition Regression is the measure of the average rélationship between two or more variables interms of the original units of the data - Blair Regression analysis Meaning regression analysis is statistical device with which weestimator or predict the unknown values of one variable from known value of another variable Regression analysis definition One of the most frequently used techniques in economies and business research, topfind a relation between two or more variables that are related causally, is regression analysis. ~ Taro Famane Uses of regression analysis > It is useful to estimate the relationship between two variables » Itis useful for production of unknown value > It is widely used in social sciences like economies, Natural and physical sciences > Itis useful to forecast the business situation > Itis useful to caleulate correlation co-efficient and co-efficient of determinations Methods of studying Regression > Graphic method > Algebraic method Graphic method Under the method the dots are plotted on a graph paper representing pair of values of the given variables having a linear relationship the independent variable is taken in the X axis and the dependent variable taken on Y axis. The regression line of X on Y provides the most probable value of X given the most probable value of Y when the exact value of X is known, Thus we get two regression lines.Regression lines 1) Regression of X on Y Il) Regression of Y on X ‘Time series Analysis > Time series analysis is the analysis of identifying different components such as trend,seasonal, cyclical and irregular in a given time series data. Definition A time series is a set of observation arranged in chronological order. Morris Hamberg requirement of a time series Data must be available for a long period of time. Data must consist of a homogeneous set of values belonging to different time periods. The time gap between the variables or composite of variables must be as For Possible equal. ‘Causes of variatigntin Time Series Data + Social customs, festivals etc. Seasons + The four phase of business: prosperity, decline, depression, recovery + Natural calamities: earthquake, epidemic, flood, drought etc, Political movements/changes, war ete Components ofTime series; Additive and multiplicative models Components of Time Series . Secular Trend . Seasonal Variation . Cyclical Variations . regular variation1, Secular Trend A secular trend or long-term trend refers to the movements of the series reflecting continuous growth or decline over a long period of time. There are many types of trend, Some trends rise upward and some fall downward 2. Seasonal Variation Is that periodic investment in business activities within the year recurring periodicallyyear after year? Generally, seasonal variation appear at weekly, monthly or quarterly intervals 3. Cyclical Variation Up and down movements afé different from seasonal fluctuations, in that they extend over longer period of time —usually two or more years, Business time series is influenced by the wave-like changes of prosperity and depression. 4, Irregular Variation Irregular vatiations or random variations constitute one of four components of a time series. They correspond to the movements that appear irregularly and generally during short periods, Irregular variations do not follow a particular model and are not predictable: Mathematical Model for a Time Series In classical analysis, itis assumed that some types of relationship exist among the fourcomponents of time series Additive Model According.to this model, the time series is expressed asY=T+S+C+I Y = the value of original time seriesT = Time Value S= Seasonal variationC = Cyclical Variation Irregular fluctuation Multiplicat ive Model According this model, the time series is expressed asY = YX SXCXIDetermination of Trend Measurements of Trends Following are the methods by which wecan measure the trend, (i) Freehand or Graphic Method, (ii) Method of Semi-Averages. (iii) Method of Moving Averages. (iv) Method of Least Squares. Free hand Graphic Method In this method we must plot the original data on the graph. Draw a smooth curve carefully which will show the direction of the trend. The time is taken’on the horizontalaxis I(X) and the value of the variable on the vertical axis (Y) Semi — Average Method In this method the original data are divided into two equal parts and average are caleulated for both the parts, These averages are called semi average, Trend line is drawn withthe help of the semi averages Fit'a trend line by the method of semi- averages for the given data. 2000 2001 2002 2003 2004 2005 2006 105 115 120 100 110 125 135 Solution: Since the number of years is odd{seven), we will leave the middle year’s productionvalue and obtain the averages of first three yearsand last three years. Year Production Wen 2000 105 ror 11505 + 115 +120 _1 43 55 2002 120 3 100 2003 (left out) 2004 «110 + + =123.33 BIMoving average method In this method, the average value of a number of years or months or weeks is taken into account and placed it at the Centre of the time span and it is is the normal or trend value forthe middle period. Calculate three-yearly moving averages of number of students studying in a higher secondary school in a particular village from the following data, Ti eRe 332 317 387 392 4o2 405 410 427 435 438 Solution: Computation othree- yearly movingaverages.Method of Least Squares ‘The line of best fit isa line from which the sum of the deviations of various points is zero. This is the best method for obtaining thetrend values. It gives a convenient basis for calculating the line of best fit for the time series. is a mathematical method for measuring trend, Further the sum ofthe squares of thesedeviations would be least when compared with other fitting methods. Ft stag ne tend by the method se ete thettend vas Soltis) copa of trend values by themethod of least squares (ODD 200 0 200 1 200 2 200 3 200 4 200 50 100 5 200 46 138 6 N= EY=316 EX=03X!=283XY=29 7 316Therefore, the required equation of thestraight line trend is given by Y= a+ 0X Y= 4543+ 1.036 (x - 2003) The trend values can be obtained by When X = 2000, Yt = 45.143 + 1.036 (2000-2003) = 42.035When X = 2001, Ye = 45.143 + 1.036 (2001-2003) = 43.071, similarly other values can be obtained, Computation of Seasonalintices bySimpleaverage Seasonal Variations can be measured by the method of simple average. The data should be available in season wise likely weeks, months quarters. Method of Simple Averages This is the’simplest and easiest method for studying Seasonal Variations. Ratios-to-moving-average method Ordinarily does not fluctuate so much as the index based on straight-line trends. This is because the 12-month moving average follows the cyclical course of the actual data quite closely. Ratio-to-trend Method’ * The ratio-to-trend method is similar to ratio-to-moving-average method + The only difference is the way of obtaining the trend values + Whereas in the ratio-to-moving-average method, the trend values are obtained by the method of moving averages, in the ratio-to-trend method Link relative’s method: Link relatives method are calculated by dividing the figure of each season* by the figure of immediately preceding season and multiplying it by 100. These percentages are called link relatives since they link each month (or quarter or other time period) to the preceding one.Meaning and of Index number As index number is a specialized average designed to measure the change in a group of related variable over a period of time. It was first constructed in the year Concept In its simplest form on Index number is a Ratio of two numbers expressed as percent. Definition Index number devices for measuring difference in the magnitude of a group of related variables ---- Croxtonand Cowden ‘Types of Index Numbers » Price Index > Quantity Index > Value Index Problems in Construction of Index numbers Simple Aggregative Method: In this method, the index number is equal to the sum of prices for the year for which index number is to be found divided by the sum of actual prices for the base year.2, Por = =~ x 100 wes Where Py; Stands forthe index number =P, Stands for the sum of the prices for the year for which index number is to be found = EP) Stands for the sum of prices for the base year. Prices in Base Prices in current Commodity Year 1980 (in Rs.) Year 1988 (in Rs.) Po Py 10 20 25 60 Index Number (P91) = = X 100 ; Por= & X 100 ; Poy = 161.11 Weighted Aggregative Method: In this method, different weights are assigned to the items according to their relative importance. Weights used are the quantity weights, Many formulae have been developed to estimate index numbers on the basis of quantity weights.(0 Laspeyre’s Formula, In this formula, the quantities of base year are accepted as weights 2Pigo Poy = = x 100 “1 2Poa0 Where P} is the price in the current year ; Po is the price in the base year ; and qo is the quantity in the base year. (i) Paasche’s Formula, In this formula, the quantities of the current year are accepted as weights. 2g Po == x 100 o” Fa Where q; is the quantity in the current year. (ii) Dorbish and Bowley’s Formula. Dorbish and Bowley's formula for estimating weighted index number is as follows : ZPigo , ZPigy Por ~ ote FP 100 or po - Where L is Laspeyre’s index and P is paasche’s Index. (iv) Fisher's Ideal Formula. In this formula, the geometric mean of two indices (i.¢., Laspeyre's Index and paasche's Index) is taken : por = |2Pid0 y 2PM 199 or Por= VEX Px 100 2Poqo 2Pon where L is Lespeyre’s Index and P is paasche’s Index. (i) Laspeyre’s Formula: Piao Por = 10 x 100 n= tt x 440 = x 100 = 166.0: Por = 5X 100 = 166.08 Test of adequacy for an Index Number * Index numbers are studied to know the relative changes in price and quantity for any two years compared.«Factor Reversal Test. * The criterion for a good index number is to satisfy the above two tests. © Fisher's index number formula satisfies the above relationship. Chain Index Numbers Under this method, firstly we express the figures for each year as a percentage of the preceding year. These are known as Link Relatives, We then need to chain them together by successive multiplication to form a chain index. ‘Steps in the construction Of Chain Index Numbers 1. Calculate the link relatives by expressing the figures as the percentage of the preceding year. Thus, Link Relatives of current year = price of current year/price of previous year X 100. 2. Calculate the chain index by applying the following formula: Chain Index = Current year relative x Previous year link relative/100 Base Shifting For a variety of reasons, it frequently becomes necessary to change the reference base of aan index number series from one time to another without returning to the original raw data and recomposing the entire series. This change of reference base period is usually referred to as “shifting the base”. Splicing ‘The process of combining two or more index numbers covering different bases into a single series is called splicing, Example the following are two series, A and B of the index numbers of a commodity taking 1991 and 1994 as the base years. Deflating Deflating means making allowances for the effect of changing price levels. The process of adjusting a series of salary or wages or income according to current price changes to find out the level of real salary wages or income is called deflating of index numbers.Consumer Price Index ‘The Consumer Price Index (CPI) measures the average price change of a set of consumer goods and services. CPIs can be calculated for single items or a predetermined group of items. All of these items are defined as "household goods and services." ‘Uses of Consumer Price Index ‘The consumer price index is mainly.used to measure inflation over a given period of time. It can also be leveraged to determine the cost of living. CPI is mainly used:to determine the efficacy of economie policies. Inflation indicates the health (or lack thereof) of an economy, so tracking it and responding to it appropriately is important for policymakers. When inflation sharply increases or decreases, the CPI provides economists and jpolicymakers insight into how a government's economic policy affects the market. Statistical quality control ‘The use Of statistical methods in the monitoring and maintaining of the quality of products and services. One method, referred to as acceptance sampling, can be used when @ decision must be made to accept or reject a group of parts or items based on the quality found in a sample, Jetobesrodennenenaicoponnodannenionsaanannedanninicenssiooeeiiace