Nature of Statistics

• Importance of Statistics in Business
• Areas where statistics is important in business

  • Accounting - auditing and cost estimation
  • Economics - regional, national, and international economic performance
  • Finance - investments and portfolio management
  • Management - human resources, compensation, and quality management
  • International Business - market and demographic analysis
  • Management Information Systems - performance of systems which gather, summarize, and disseminate information to various managerial levels
  • Marketing - market analysis and consumer research
• The importance of statistics to a public administration helps him in devising the correct policy focus on the most priority area. The public administrator takes the analysis from the statistical datasets to appropriate the budget allocation and determines the amount of allocation too.
• Statistics


  A branch of Mathematics that examines and investigates ways to process and analyze the data gathered
• Purpose of Statistics


  To reduce large masses of data to some meaningful values
• Descriptive Statistics


  To tell something about a particular group of observation
• Inferential Statistics


  There is an intent of predicting what the large population is like out of the sample size
• Division of Statistics


  • Descriptive
  • Inferential
• Population


  Consist of all the members of the group about which to draw conclusion
• Sample


  Portion or part, of the population of interest selected for analysis
• Parameter


  Numerical index describing a characteristic of a population
• Statistic


  Numerical index describing a characteristic of a sample
• Sources of Data


  • Primary Data
  • Secondary Data
• Constant


  Characteristics of objects, people, or events that does not vary
• Variable


  Characteristics of objects, people, or events that can take of different values
• Types of Variables


  • Qualitative (Categorical)
  • Quantitative (numerical)
• Quantitative Variables


  • Discrete
  • Continuous
• Experimental Classification of Variables

  • Independent Variables
  • Dependent Variables
• Mathematical Classification of Variables

  • Discrete Variables
  • Continuous Variables
• Levels of Measurement


  • Nominal
  • Ordinal
  • Interval
  • Ratio
• Nominal Level Data


  Numbers are used to classify or categorize
• Ordinal Level Data


  Numbers are used to indicate rank or order
• Interval Level Data


  Distances between consecutive integers are equal
• Ratio Level Data


  Highest level of measurement
• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• Rational


  (in classical economic theory) economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Rational agents will select the choice which presents the highest benefits
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• If you add up marginal utility for each unit you get total utility
• Interval level data


  • Distances between consecutive integers are equal
  • Relative magnitude of numbers is meaningful
  • Differences between numbers are comparable
  • Location of origin, zero, is arbitrary
  • Vertical intercept of unit of measure transform function is not zero
• Interval level data


  • Fahrenheit Temperature
  • Calendar Time
  • Monetary Units
• Ratio level data


  • Relative magnitude of numbers is meaningful
  • Differences between numbers are comparable
  • Location of origin, zero, is absolute (natural)
  • Vertical intercept of unit of measure transform function is zero
• Ratio level data


  • Height, Weight, and Volume
  • Monetary Variables, such as Profit and Loss, Revenues, and Expenses
  • Financial ratios, such as P/E Ratio, Inventory Turnover, and Quick Ratio
• Data level


  • Nominal
  • Ordinal
  • Interval
  • Ratio
• Meaningful operations


  • Classifying and Counting
  • All of the above plus Ranking
  • All of the above plus Addition, Subtraction, Multiplication, and Division
  • All of the above
• Statistical methods


  • Nonparametric
  • Nonparametric
  • Parametric
  • Parametric
• Qualitative variable


  Categories that are mutually exclusive and exhaustive
• Nominal level


  • Gender
  • Automobile Ownership
  • Type of Life Insurance Owned
• Interval level


  • Temperature (in degree oC or oF)
  • Calendar Time (Gregorian, Hebrew, or Islamic)