Lecture 1

Data and Statistics

 Lecture Outline
Applications in Business and Economics

Data

Data Sources

Descriptive Statistics

Statistical Inference

Slide 2
 Applications in
Business and Economics
Accounting
Public accounting firms use statistical sampling
procedures when conducting audits for their
clients.
Finance
Financial advisors use a variety of statistical
information, including price-earnings ratios and
dividend yields, to guide their investment
recommendations.
Marketing
Electronic point-of-sale scanners at retail
checkout counters are being used to collect data
for a variety of marketing research applications.
Slide 3
 Applications in
Business and Economics
Production
A variety of statistical quality control charts are
used to monitor the output of a production
process.
Economics
Economists use statistical information in
making forecasts about the future of the
economy or some aspect of it.

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 Data

Elements, Variables, and Observations

Scales of Measurement

Qualitative and Quantitative Data

Cross-Sectional and Time Series Data

Slide 5
 Data and Data Sets
Data are the facts and figures that are

collected, summarized, analyzed, and

interpreted.

The data collected in a particular study are

referred to as the data set.

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 Elements, Variables, and
Observations
The elements are the entities on which data are
collected.
A variable is a characteristic of interest for the
elements.
The set of measurements collected for a
particular element is called an observation.
The total number of data values in a data set is
the number of elements multiplied by the
number of variables.

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 Data, Data Sets, Elements,
Variables, and Observations

Variables
Stock Annual Earn/
Company Exchange Sales($M) Sh.($)
Dataram AMEX 73.10 0.86
EnergySouth OTC 74.00 1.67
Keystone NYSE 365.70 0.86
LandCare NYSE 111.40 0.33
Psychemedics AMEX 17.60 0.13

Elements Data Set Datum

Slide 8
 Scales of Measurement
Scales of measurement include:
Nominal
Ordinal
Interval
Ratio
The scale determines the amount of information
contained in the data.
The scale indicates the data summarization and
statistical analyses that are most appropriate.

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 Scales of Measurement
Nominal

Data are labels or names used to identify

an attribute of the element.

A nonnumeric label or a numeric code

may be used.

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 Scales of Measurement
Nominal
Example:
Students of a university are classified by
the school in which they are enrolled using
a nonnumeric label such as Business,
Humanities, Education, and so on.
Alternatively, a numeric code could be used
for the school variable (e.g. 1 denotes
Business, 2 denotes Humanities, 3 denotes
Education, and so on).

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 Scales of Measurement
Ordinal

The data have the properties of nominal

data and the order or rank of the data is
meaningful.

A nonnumeric label or a numeric code

may be used.

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 Scales of Measurement
Ordinal
Example:
Students of a university are classified by
their class standing using a nonnumeric
label such as Freshman, Sophomore, Junior,
or Senior.

Alternatively, a numeric code could be used

for the class standing variable (e.g. 1
denotes Freshman, 2 denotes Sophomore,
and so on).

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 Scales of Measurement
Interval

The data have the properties of ordinal data

and the interval between observations is
expressed in terms of a fixed unit of measure.

Interval data are always numeric.

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 Scales of Measurement
Interval
Example:
Melissa has an SAT score of 1205, while
Kevin has an SAT score of 1090. Melissa
scored 115 points more than Kevin.

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 Scales of Measurement
Ratio
The data have all the properties of
interval data and the ratio of two values
is meaningful.
Variables such as distance, height,
weight, and time use the ratio scale.
This scale must contain a zero value that
indicates that nothing exists for the
variable at the zero point.

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 Scales of Measurement
Ratio

Example:

Melissa’s college record shows 36 credit

hours earned, while Kevin’s record shows
72 credit hours earned. Kevin has twice as
many credit hours earned as Melissa.

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Qualitative and Quantitative Data
Data can be further classified as being
qualitative or quantitative.

The statistical analysis that is appropriate

depends on whether the data for the variable
are qualitative or quantitative.

In general, there are more alternatives for

statistical analysis when the data are
quantitative.

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 Qualitative Data
Qualitative data are labels or names used to
identify an attribute of each element.

Qualitative data use either the nominal or

ordinal scale of measurement.

Qualitative data can be either numeric or

nonnumeric.

The statistical analysis for qualitative data are

rather limited.

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 Quantitative Data
Quantitative data indicate either how many or
how much.
Quantitative data that measure how many
are discrete.
Quantitative data that measure how much
are continuous because there is no separation
between the possible values for the data..
Quantitative data are always numeric.
Ordinary arithmetic operations are meaningful
only with quantitative data.

Slide 20
Cross-Sectional and Time Series
Data
Cross-sectional data are collected at the same
or approximately the same point in time.
Example: data detailing the number of
building permits issued in June 2000 in each
of the counties of Texas
Time series data are collected over several time
periods.
Example: data detailing the number of
building permits issued in Travis County,
Texas in each of the last 36 months

Slide 21
 Data Sources
Existing Sources
Data needed for a particular application
might already exist within a firm.
Detailed information is often kept on
customers, suppliers, and employees for
example.
Substantial amounts of business and
economic data are available from
organizations that specialize in
collecting and maintaining data.

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 Data Sources
Existing Sources

Government agencies are another important

source of data.

Data are also available from a variety of

industry associations and special-interest
organizations.

Slide 23
 Data Sources
Internet
The Internet has become an important source
of data.
Most government agencies, like the Bureau of
the Census (www.census.gov), make their data
available through a web site.
More and more companies are creating web
sites and providing public access to them.
A number of companies now specialize in
making information available over the
Internet.

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 Data Sources
Statistical Studies
Statistical studies can be classified as either
experimental or observational.
In experimental studies the variables of
interest are first identified. Then one or more
factors are controlled so that data can be
obtained about how the factors influence the
variables.
In observational (nonexperimental) studies no
attempt is made to control or influence the
variables of interest.
•A survey is perhaps the most common type
of observational study.

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Data Acquisition Considerations
Time Requirement
Searching for information can be time
consuming.
Information might no longer be useful by the
time it is available.
Cost of Acquisition
Organizations often charge for information
even when it is not their primary business
activity.
Data Errors
Using any data that happens to be available
or that were acquired with little care can lead
to poor and misleading information.

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 Descriptive Statistics

Descriptive statistics are the tabular, graphical,

and numerical methods used to summarize data.

Slide 27
Example: Hudson Auto Repair
The manager of Hudson Auto would like to
have a better understanding of the cost of
parts used in the engine tune-ups
performed in the shop. She examines 50
customer invoices for tune-ups. The costs
of parts, rounded to the nearest dollar, are
listed below.
91 78 93 57 75 52 99 80 97 62
71 69 72 89 66 75 79 75 72 76
104 74 62 68 97 105 77 65 80 109
85 97 88 68 83 68 71 69 67 74
62 82 98 101 79 105 79 69 62 73

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 Example: Hudson Auto Repair
Tabular Summary (Frequencies and Percent
Frequencies)

Parts Percent
Cost ($) Frequency Frequency
50-59 2 4
60-69 13 26
70-79 16 32
80-89 7 14
90-99 7 14
100-109 5 10
Total 50 100

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Example: Hudson Auto Repair
Graphical Summary (Histogram)
18
16
14
Frequency

12
10
8
6
4
2
Parts
50 60 70 80 90 100 110 Cost ($)

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Example: Hudson Auto Repair
Numerical Descriptive Statistics

The most common numerical descriptive

statistic is the average (or mean).

Hudson’s average cost of parts, based on the

50 tune-ups studied, is $79 (found by
summing the 50 cost values and then dividing
by 50).

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 Statistical Inference
Statistical inference is the process of using data

obtained from a small group of elements (the

sample) to make estimates and test hypotheses

about the characteristics of a larger group of

elements (the population).

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Example: Hudson Auto Repair
Process of Statistical Inference

1. Population
consists of all 2. A sample of 50
tune-ups. Average engine tune-ups
cost of parts is is examined.
unknown.

4. The value of the 3. The sample data

sample average is used provide a sample
to make an estimate of average cost of
the population average. $79 per tune-up.

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