Measures of Dispersion

Prepared by: Bhakti Joshi

Date: November 30, 2011

Meaning and Importance

Study of dispersion or variation in
observations that we seek to explain
Study whether observations lie around
the centre or away from the centre
Examples:

Wages provided in the factory

Income variations across populations
Variations in petrol prices across cities
Variations in the standard of living of
people within a city/region

Tools in Measures of
Dispersion
Range Difference between the highest
and lowest observations
Interquartile Range Measures
approximately how far from the median
Variance Measures the spread of
values or observations around the mean
Standard Deviation Square root of
variance

Range
Difference between largest &
smallest observations
Ignores how data are distributed
Range x

largest

xsmallest

Weekly WPI Indices from June

04, 2011 to November 12,
2011

196.6,
197.2,
199.5,
200.6,
202.4,
205.0,

195.4,
197.5,
197.8,
201.8,
203.4,
204.7,

194.9,
198.6,
199.0,
202.9,
203.8,
203.0,

196.7,
198.0,
200.2,
204.0,
204.5,
201.9.

Step 1: Arrange all the numbers in an

ascending order
Step 2: Identify the minimum index
Step 3: Identify the maximum index

Interquartile Range
Difference between third & first quartiles
(Data points are divided into four parts or
by 1/4th)
Interquartile Range = Q3 - Q1
Spread in middle 50%
Step
Not1:affected
byQuartile
extreme
values
Determine
1, which
is the data
point lies across one-fourth or 25% of the
observations
Step 2: Determine Quartile 3, which is the data
point lies across one-fourth or 25% of the
observations from the median

Interquartile Range

Quartile
3

Quartile
1
Quartile
2

Variance & Standard

Deviation
Most commonly used measures
Consider how data are distributed
Show variation about mean (x or )
Symbols:

Population
2

Variance

Standard Deviation

Sampl

Population Variance Formula

2

(x

N
2

(x ) (x ) (x )
1
2
N
N
Where:
N - Population size

x - item or observation

- Population mean

- sum of the values

Population Variance Formula

2

(x

N
2

(x ) (x ) (x )
1
2
N
N
Remember --N in denominator.
Use n - 1 if Sample
Variance

Population Standard Deviation

Formula

Square
Root

(x

(x 1 )

(x 2 )
N

... ( x N )

Sample Variance Formula

(x1 x)
_

n 1
2

Where:
n - sample size
x - item or observation
x - sample mean
- sum of the values

(x2 x)
_

n - 1 in denominator!
(Use N if Population
Variance)
2

(xn x)
_

(xi x)
_

n 1
x)

Calculate Variance and

Standard Deviation for WPI
Step 1: Calculate the mean x
Step 2: Determine n
xi x
Step 3: Another column determine
i.e. x x, x x ,
x24 x
1
2
2
Step 4: Subsequent
column, determine

(xi x)
2,
2
2
i.e.
(x1 x), (x2 x) ,
(x24 x)
Step 5: Calculate
the sum of the
column determined,
in Step 4
Step 6: Divide the sum with
n 1

Variance and Standard

Deviation
Mean = 200.39
2
Sum of (xi x)
= 231.84
Variance = 231.84 / 23 = 10.1
Standard Deviation = 3.17
_

Variance & Standard Deviation

for class intervals

1-3

18

36

-5.715

4-6

90

450

-2.714

7-9

44

352

0.29

10-12

21

11

231

3.285

13-15

14

126

6.285

16-18

17

153

9.285

19-21

20

80

12.285

22-24

23

115

15.385

xi x
_

fx

xi x

2
f

xi x
_

Hospit
al stay Frequen
in
cy of
Midpoi
days
Patients nt (x)
(interv
(f)
al)

Mean = 1543/200= 7.715, Standard

Problem 1
The number of cheques cashed each day at five
branches of HDFC bank during the past month had the
following frequency distribution. The Director of
operations knows that a standard deviation in cheque
cashing of more than 200 cheques per day creates
staffing and organizational problems at the branches
because of the uneven workload. Should the director
worry about
staffing new month?
Class
Frequency

0-199
200-399
400-599
600-799
800-999

10
13
17
42
18

Email: bhaktij@gmail.com
Website:
www.headscratchingnotes.ne
t