Quantitative Analysis

Quantitative Analysis
Marc Aerts
Center for Statistics

Hasselt University
Preparation programme Master of Management Quantitative Analysis 1/117

General Information
Teaching team
Marc Aerts, E123, marc.aerts@uhasselt.be

Alvaro Florez, E101, alvaro.florez@uhasselt.be

Major topics
Basic mathematics (lecture 1)
Basic probability theory (lecture 1)
Descriptive statistics (lecture 2)
Sampling: design and procedures (lecture 3 and 4)
Confidence intervals, hypotheses testing, sample size
determination (lecture 3 and 4)
Analysis of variance and covariance (lecture 5)
Correlation and regression (lecture 6)
Logit analysis (lecture 7)

Miscellaneous
Software: SPSS
Main textbook
Malhotra, Nunan and Birks (2017)
Marketing Research, An Applied Approach, 5th Edition
Pearson
Other textbook
Anderson, Sweeney, Williams, Freeman and Shoesmith
(2017)
Statistics for Business and Economics, 4th Edition
CENGAGE Learning

Evaluation
Final written exam 20/20
Open book
Written exam
No theory
Multiple choice questions
Open questions (exercises)

Basic mathematics

Basic mathematics
Characteristics of basic mathematical functions

linear
quadratic
polynomial
exponential
logarithmic
sinusoidal
Illustrations with app ‘Graph’

Basic probability theory

Basic probability theory
• Probability of an event and basic rules
• Random variables
• Discrete random variables and their distributions
• Continuous random variables and their distributions

Assigning probabilities
Stochastic experiment with outcomes Ei , i = 1, ..., n
0 ≤ P (Ei ) ≤ 1
P (E1 ) + P (E2 ) + ... + P (En ) = 1

Assigning probabilities
• Equally likely outcomes
• Relative frequencies
• Subjective

Probability of an event
Event
A ⊂ {E1 , E2 , ..., En }
Probability P (A) is equal to the sum of the probabilities of the

outcomes constituting the event

KPL example

KPL example

KPL example
? probability that the project will take ten months or less

Basic rules of probability theory
ˉ = 1 − P (A)
P (A)
P (A ∪ B) = P (A) + P (B) − P (A ∩ B)
? probability that the project will take more than ten months
? probability that the project will take less than 11 months or

more than 9 months

Conditional probability
Definition
P (A ∩ B)
P (A|B) =
P (B)
P (A ∩ B)
P (B|A) =
P (A)
Consequently
P (A ∩ B) = P (A|B)P (B)
P (A ∩ B) = P (A)P (B|A)

Independent events
Definition
P (A|B) = P (A)
P (B|A) = P (B)
Consequently
P (A ∩ B) = P (A)P (B)

Promotion example
? P (A), P (A|M ), P (A|W )

Law of total probability
Mutually exclusive events whose union is the entire set of outcomes
A1 , ..., Ai , ..., An
Known probabilities
P (A1 ), ..., P (Ai ), ..., P (An )
and conditional probabilities for a event B of interest
P (B|A1 ), ..., P (B|Ai ), ..., P (B|An )
Then the unconditional ‘total’ probability on the event B
P (B) = P (B ∩ A1 ) + ... + P (B ∩ Ai ) + ... + P (B ∩ An )
P (B) = P (B|A1 )P (A1 )+...+P (B|Ai )P (Ai )+...+P (B|An )P (An )

Bayes theorem
Same setting, but interest in the conditional probability P (Ai |B)
P (Ai ∩ B)
P (Ai |B) =
P (B)
P (B|Ai )P (Ai )
=
P (B)
P (B|Ai )P (Ai )
=
P (B|A1 )P (A1 ) + ... + P (B|An )P (An )

Supplier example

Supplier example

Supplier example

Random variables
Random variable:
A random variable is a numerical description of particular
outcomes of an experiment

Random variables
Random variable:
A random variable is a numerical description of particular
outcomes of an experiment

Discrete distributions
Discrete probability function
p(x) = P (X = x)
Properties
p(x) ≥ 0
P
p(x) = 1
Cumulative probability distribution

X
F (x) = p(y)
y≤x
Mean and variance

P
E(X) = μ = xp(x)
P
V ar(X) = σ2 = (x − μ)2 p(x)
Uniform distribution
All outcomes equally likely
Probability function
p(x) = 1/n
with n the number of values the random variable may assume

Binomial experiment

Binomial distribution
Random variable
X = number of successes out of n trials

n x
p(x) = π (1 − π)n−x , x = 0, 1, ..., n
x
Mean and variance
μ = nπ, σ 2 = nπ(1 − π)

Marrine Clothing Store example


? E(X), V ar(X)

Poisson experiment

Poisson distribution
Random variable
X = number of events in a continuum
μx e−x
p(x) = , x = 0, 1, ...
x!
Mean and variance

μ = μ, σ 2 = μ

Cars example
X= number of cars arriving in any 15-minute period
The average is 10 cars in a 15-minute period
? probability of exactly five arrivals in 15 minutes
? mean number of arrivals per 15-minute period
? standard deviation of the number of arrivals per 15-minute

period

Continuous distributions
Probability density function f (x)
Properties
f (x) ≥ 0
R
f (x)dx = 1
Cumulative probability distribution

Z
F (x) = f (y)dy
y≤x
Mean and variance

R
E(X) = μ = xf (x)dx
R
V ar(X) = σ2 = (x − μ)2 f (x)dx

Uniform distribution
All outcomes equally likely
Density function
1
f (x) = , a≤x≤b
b−a
with a (b) the smallest (largest) possible value

Normal distribution
Random variable
X → wide variety of variables
Density function
1 (x−μ)2
f (x) = √ e− 2σ2 , −∞ < x < ∞
σ 2π
Mean μ and variance σ 2
Standard normal
X −μ
Z=
σ

Normal distribution

Normal distribution

Normal distribution

Greer Tyre Company example
X = number of kilometres the tyre will last, is normally distributed

Exponential distribution
Random variable
X = time until an event happens or time between two events
Density function
1 − μx
f (x) = e , 0<x<∞
μ
Mean μ and variance σ 2 = μ2
Cumulative distribution function

x
−μ
F (x) = 1 − e , 0<x<∞

Schips loading dock example example
X = time it takes to load a truck at the Schips loading dock

with mean time to load a truck 15 minutes

Descriptive statistics

Descriptive statistics
Plots, graphs, tables, summary measures
Bar charts, histograms, boxplots, ....
Frequency tables, contingency tables, ...
Mean, median, variance, standard deviation, ...
Illustrations in SPSS

Sampling: design and procedures

The sampling design process

A classification of sampling techniques

Symbols for population and sample parameters

Sampling distributions
Repeated sampling
Example: head of personnel services needs a profile of the

company’s 2500 managers
• annual salary
• management training programme status



ˉ and sample proportion P as random variables

Sample mean X

Repeated sampling:
ˉ random variable
sample mean X

Repeated sampling:
ˉ and sample proportion P as random variables
sample mean X

ˉ
Sampling distribution of X

ˉ
Sampling distribution of X
• Population normally distributed ⇒ X ˉ normally distributed

• Population not normally distributed but sample size is large
enough (at least 30)
⇓
Xˉ approximately normally distributed

Central limit theorem

Sampling distribution of P

Confidence intervals, hypotheses testing,

sample size determination

Confidence intervals for the mean



Confidence intervals for the proportion

Data example: confidence intervals for the mean
• Javed Manufacturing is considering a new computer-assisted
program to train maintenance employees to do machine repairs.
• To fully evaluate the program, the manufacturing manager

requested an estimate of the population mean time required for
maintenance employees to complete the training.
• A sample of 20 employees is selected, with each employee in the

sample completing the training programme.
• Data on the training time in days for the 20 employees are shown
in the following table

Data example: confidence intervals for the mean
Sample mean and standard deviation
95% confidence interval for the mean of the training time (in days)

Determining the sample size
For the mean
For the proportion

Example: determining the sample size

Testing hypothesis for the mean





Two sided (two-tailed) testing
Variance σ 2 unknown


Example: testing hypothesis for the mean

Testing hypothesis for the proportion

Example: testing hypothesis for the proportion

Analysis of variance and covariance

Analysis of variance (ANOVA)

Example: analysis of variance
The effect of dealership promotion X on the sales of new cars Y

Analysis of variance



H0 ; no effect of dealership promotion X on the sales of new cars Y



f test
mean squareof between groups /
mean sum of square within groups


SPSS: car sales example




Two-way analysis of variance

Two-way analysis of variance








Analysis of covariance (ANCOVA)



Correlation and regression

Logit analysis

Quantitative Analysis

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Quantitative Analysis

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Quantitative Analysis

Center for Statistics

Preparation programme Master of Management Quantitative Analysis 1/117

Marc Aerts, E123, marc.aerts@uhasselt.be

Preparation programme Master of Management Quantitative Analysis 2/117

Preparation programme Master of Management Quantitative Analysis 3/117

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Characteristics of basic mathematical functions

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Basic probability theory

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• Probability of an event and basic rules

• Discrete random variables and their distributions

• Continuous random variables and their distributions

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Stochastic experiment with outcomes Ei , i = 1, ..., n

P (E1 ) + P (E2 ) + ... + P (En ) = 1

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• Equally likely outcomes

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Probability P (A) is equal to the sum of the probabilities of the

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? probability that the project will take ten months or less

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? probability that the project will take less than 11 months or

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? P (A), P (A|M ), P (A|W )

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P (A1 ), ..., P (Ai ), ..., P (An )

and conditional probabilities for a event B of interest

P (B|A1 ), ..., P (B|Ai ), ..., P (B|An )

Then the unconditional ‘total’ probability on the event B

P (B) = P (B ∩ A1 ) + ... + P (B ∩ Ai ) + ... + P (B ∩ An )

P (B) = P (B|A1 )P (A1 )+...+P (B|Ai )P (Ai )+...+P (B|An )P (An )

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Same setting, but interest in the conditional probability P (Ai |B)

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Cumulative probability distribution

Mean and variance

All outcomes equally likely

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X = number of successes out of n trials

Mean and variance

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X = number of events in a continuum

Mean and variance

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