Quantitative Techniques

Ranjit Roy/Sharad Bhattacharya

Science of data
collecting, processing,
presentation, analysing
interpretation of data

numbers with context

 Statistical
Data Information
Tools
 Why a Manager Needs to
Know 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
 Why We Need Data
• To provide input to survey
• To provide input to study
• To measure performance of service or production
process
• To evaluate conformance to standards
• To assist in formulating alternative courses of
action
• To satisfy curiosity
 Statistics
• Data Collection
• Summarizing Data
• Interpreting Data
• Drawing Conclusions from Data
 Scales of Measurement
• Nominal Scale: When the data for a variable
consist of labels or names used to identify an
attribute of the element, the scale of
measurement is considered a nominal scale.
Example
Stock Exchange Opening Closing
RIL NSE 895.36 898.50
SBIN BSE 795.25 800.20
Scale of measurement for ex is nominal coz
labels are used.
 Scales of Measurement
•Ordinal Scale: If data exhibit the properties of
nominal data and the order or rank of the data is
meaningful.
Example: Jalan Motors sends customers a questionnaire designed
to obtain data on the quality of its automotive repair service. Each
customer provides a rating of excellent, good or poor. Because the
data obtained ate the labels - excellent, good or poor- the data has
the properties of nominal data. In addition, data was ranked:
excellent – best service(1) followed by good (2) and poor(3).
Thus the scale was ordinal.

Data for an ordinal scale may be numeric or nonnumeric.

 Data Categories

Data

Quantitative Qualitative
(numerical) (categorical)
 Qualitative Data
• Ideas
• Opinions
• Categorical Evaluation

Examples:

Color Preference
Favored Political Candidate
Quality Evaluation - Defective of non-defective
 Quantitative Data
Annual Income
Football Attendance
Interest Rates
Industrials Average
Number of Defective Parts in a Shipment
Number of Late Deliveries Last Month
Percentage of Satisfied Customers

Discrete Continuous
 Cross-sectional and Time series data
• Cross-sectional data: Data collected at
the same or approximately the same
point in time.
Examples?
• Time series data: Data collected over
several time periods.
Examples?
 Data Sources
Primary Secondary
Data Collection Data Compilation

Print or Electronic
Observation Survey

Experimentation
 Methods of Obtaining Data
• Observation
• Personal Interviews
– Structured
– Unstructured Primary Data
• Telephone Surveys
• Mail Questionnaires

• Bar Codes
• Scanners
• Reproduced
Secondary Data
 Data Collection
• Designing experiments
– Does aspirin help reduce the risk of heart attacks?

• Observational studies
– Polls - Patil’s approval rating
 Statistical Methods
• Descriptive statistics
– Collecting and describing data
• Inferential statistics
– Drawing conclusions and/or making
decisions concerning a population based
only on sample data
 Descriptive Statistics
• Collect data
– e.g. Survey
• Present data
– e.g. Tables and graphs
• Characterize data ∑X i

n
– e.g. Sample mean =
 Inferential Statistics
• Estimation
– e.g.: Estimate the population
mean weight using the sample
mean weight
• Hypothesis testing
– e.g.: Test the claim that the
population mean weight is 120
pounds
Drawing conclusions and/or making decisions
concerning a population based on sample results.
 Population consists
of all bulbs A sample of 200
manufactured with bulbs is
the new filament. manufactured with
the new filament.
Average lifetime is
unknown

The sample average

Sample data provide
is used to estimate
a sample average
the population
lifetime of 80 hrs per
average.
bulb
 Statistics
Aggregate of facts affected to a marked extent
by a multiplicity of causes, numerically
expressed, enumerated or estimated
according to a reasonable standard of
accuracy, collected in a systematic manner
for a predetermined purpose and placed in
relation to each other.
-- H Secrist--
 Population

The set of data (numerical or otherwise)

corresponding to the entire collection of
units about which information is sought
OR
A population (universe) is the collection of
things under consideration.
 Population Examples
• Unemployment - Status of ALL employable
people (employed, unemployed) in the India.
• MAT Scores - MAT scores of EVERY person that
took the part during February 2007
• Responses of ALL currently enrolled underage
college students as to whether they have
consumed alcohol in the last 24 hours.
 Population Examples cont.
Again: Population Defined:
The Collection of All Items of Interest (Universe)

• All People Living in Ghaziabad

• All HP Laser-jet Printers Sold in 2006
• All Accounts Receivable Balances
• All Homeowners in NCR
– over 35 years old
– employed
– married
– 2 or more children
 Sample

A subset of the population data that are

actually collected in the course of a study.
OR
A sample is a portion of the population
selected for analysis.
 Sample Examples
• Unemployment - Status of the 1000 employable people
interviewed.
• MAT Scores - MAT scores of 20 people that took the
February MAT during 2007
• Responses of 538 currently enrolled underage college
students as to whether they have consumed alcohol in the
last 24 hours
Population vs. Sample

Population Sample
Populations and Samples

Sample

Population
Sample

Sample
 Samples
Again Sample Defined:
A Subset of a population.

A Representative Sample
– Has the characteristics of the population

• Census - A Sample that Contains all Items in the

Population.
 Other Definitions

• A parameter is a summary measure

computed to describe a characteristic of the
population
• A statistic is a summary measure computed
to describe a characteristic of the sample
WHO CARES?

In most studies, it is difficult

to obtain information from
the entire population. We
rely on samples to make
estimates or inferences
related to the population.
 Types of Statistical Analysis
• Descriptive Statistics
– Graphical Tools
– Numerical Measures
• Inferential Statistics
– Populations
– Samples
• Probability
– Linking Descriptive and Inferential Statistics
 Statistical Inference

Drawing Conclusions (Inferences) about a

Population Based on an examination of a
Sample taken from the population
The Concept of Statistical
Inference
 Statistical Inference Examples
• Nielson TV Ratings
• Exit Polls
• Market Research
• Financial Auditing
• Opinion Surveys
 Tools for Describing Data
• Graphical Tools
– Pie Charts
– Bar Charts
– Histograms
– Stem and Leaf Diagrams
– Trend Charts
– Many Variations of the above......
 Analyzing Quantitative Data
On-Time Delivery Example
Variable x = Number of days Delivery is Late
(Each data point represents one shipment.)
Raw Data:
0 2 3 4 1 0 0 1
3 0 3 1 1 0 0 0
2 2 0 0 0 1 2 0
4 1 0 1 0 0 0 1
1 0 0 0 0 1 3 1

N = 40 shipments
 Organizing the Data
Step 1
Form a Data Array: Sort the data in numerical ord
Raw Data:
0 2 3 4 1 0 0 1
3 0 3 1 1 0 0 0
2 2 0 0 0 1 2 0
4 1 0 1 0 0 0 1
1 0 0 0 0 1 3 1
Data Array
Low 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 1 1 1 1 1
1 1 1 1 1 1 2 2
2 2 3 3 3 3 4 4 High
 Organizing the Data
Step 2
Construct a Frequency Distribution
• Ungrouped Frequency Distribution
– When the variable has only a few different values
– Number of data values may be high or low

• Grouped Data Frequency Distribution

– When the variable has more than a few different values
– Number of data values is high
 Frequency Distribution

A table that divides the data into classes and shows

the number of observed values that fall into each class.
 Frequency Distribution
On-Time Delivery Example
Use ungrouped Frequency Distribution since the variable
takes on only a few different values.
Data Array
Low 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 1 1 1 1 1
1 1 1 1 1 1 2 2
2 2 3 3 3 3 4 4 High

x Frequency
0 19
1 11
2 4
Frequency Distribution
3 4 N = 40 values
4 2
 Presenting Data
Forming a Histogram
On-Time Delivery Example
25

20
Frequency

15

10

0
x
0 1 2 3 4
Days Late
 Relative Frequency Distribution
On-Time Delivery Example
x Frequency Relative Frequency
0 19 19/40 = .475
1 11 11/40 = .275
2 4 4/40 = .100
3 4 4/40 = .100
4 2 2/40 = .050
40 1.000

Relative Frequency Distributions are useful for comparing

wo or more data sets which have different volumes of data.
 Relative Frequency Histogram
On-Time Delivery Example
.675
Relative Frequency

.50

.375

.25

0 x
0 1 2 3 4
Days Late
 Comparing Two Companies:
On-Time
1
Delivery
2
Distributions
x Frequency Frequency
0 19 190
1 11 110
2 4 40
3 4 40
4 2 20
40 400
 Comparing Two Companies:
On-Time
1 2
Delivery Distributions
X F RF F RF
0 19 .475 190 .475 0.5
1 11 .275 110 .275 0.4
2 4 .100 40 .275
0.3
3 4 .100 40 .275 Comp 1
Comp 2
4 2 .050 20 .050 0.2
0.1
40 400
0
0 1 2 3 4

Not a
Histogram !!!
 Cumulative Frequency Distribution
On-Time Delivery Example
Cumulative Frequency
Histogram
X F CF
0 19 19
1 11 30
2 4 34
3 4 38
4 2 40
40
 Design of Survey Research
• Choose an appropriate mode of response
– Reliable primary modes
• Personal interview
• Telephone interview
• Mail survey
– Less reliable self-selection modes (not appropriate
for making inferences about the population)
• Television survey
• Internet survey
• Printed survey on newspapers and magazines
• Product or service questionnaires
 Design of Survey Research(continue
d)
• Identify broad categories
– List complete and non-overlapping categories
that reflect the theme
• Formulate accurate questions
– Make questions clear and unambiguous. Use
universally-accepted definitions
• Test the survey
– Pilot test the survey on a small group of
participants to assess clarity and length
 Design of Survey Research(continue
d)

• Write a cover letter

– State the goal and purpose of the survey
– Explain the importance of a response
– Provide assurance of respondent’s anonymity
– Offer incentive gift for respondent participation
 Reasons for Drawing a Sample
• Less time consuming than a census
• Less costly to administer than a census
• Less cumbersome and more practical to
administer than a census of the targeted
population
 Types of Sampling Methods
Samples

Non-Probability Probability Samples

Samples
Simple
Random Stratified
Judgement Chunk
Cluster
Systematic
Quota
 Simple Random Samples
• Every individual or item from the frame has
an equal chance of being selected
• Selection may be with replacement or
without replacement
• Samples obtained from table of random
numbers or computer random number
generators
 Systematic Samples
• Decide on sample size: n
• Divide frame of N individuals into groups of
k individuals: k=n/n
• Randomly select one individual from the 1st
group
• Select every k-th individual thereafter
N = 64
n=8 First Group

k=8
 Stratified Samples
• Population divided into two or more groups
according to some common characteristic
• Simple random sample selected from each
group
• The two or more samples are combined into
one
 Cluster Samples
• Population divided into several “clusters,”
each representative of the population
• Simple random sample selected from each
• The samples are combined into one
Population
divided
into 4
clusters.
 Advantages and Disadvantages
• Simple random sample and systematic sample
– Simple to use
– May not be a good representation of the population’s
underlying characteristics
• Stratified sample
– Ensures representation of individuals across the entire
population
• Cluster sample
– More cost effective
– Less efficient (need larger sample to acquire the same
level of precision)
 Evaluating Survey Worthiness
• What is the purpose of the survey?
• Is the survey based on a probability sample?
• Coverage error – appropriate frame
• Non response error – follow up
• Measurement error – good questions elicit
good responses
• Sampling error – always exists
 Types of Survey Errors
Excluded from
• Coverage error frame.

• Non response error Follow up on

non responses.
• Sampling error
Chance
• Measurement error differences from
sample to sample.

Bad Question!