Indian School of Business

Statistical Methods for Management Decisions

Academic Year & Term, 2016, Term 1
Instructor: Robert Stine

( Sessions 1 5)

Affiliation: Wharton School, University of Pennsylvania.

Email:

ISB id:
Home School id: stine@wharton.upenn.edu

Instructor: Richard Waterman

( Sessions 6 10)

Affiliation: Wharton School, University of Pennsylvania.

Email:

Office Hours: Mon-Thurs, 18:00-19:30

Office Hours: ___day to ____day from

___Hrs to ___ Hrs

ISB id:
Home School id: waterman@wharton.upenn.edu

Course Objective and Key-takeaways from the course

This course develops the key statistical ideas that are essential in business decision-making. The course
concentrates on understanding, modeling, and managing the variability that surrounds business information. The
course focuses on applied statistical modeling, in particular the foundations of inference and the use of the linear
regression model. The course begins by developing methods that describe variation and ultimately allow
inferences and judgment in the presence of uncertainty. The course then develops the linear regression model as
a framework for modeling associations among economic processes. Students will be expected to appreciate the
underlying concepts and will be required to put these concepts to practical use in the analysis of data.
Learning Goals
1. Learn the role of data and statistical modeling in business decision making. Data provide information that
allows managers to make informed choices, but the growing presence of too much data of poor quality
leads only to confusion. Managers need the ability to relate data to business tasks, critically assessing the
quality of information and presence of random variation. Statistics provides methods that penetrate the
fog of information and produce profitable insights.
2. Identify opportunities for integrating quantitative methods into business processes. Statistical methods
have great relevance across the spectrum of management roles, but only when managers are able to
seize upon the opportunity. This course places statistical methods within the context of challenging
management decisions, ranging from managing human resources to allocating financial assets.
3. Communicate the relevance and outcomes of statistical analysis to a business audience. Statistical
modeling is powerful, but only to the degree that managers are able to convey the results of models to
colleagues and decision-makers. Students will be expected to explain the relevance of data and models
to decisions.
4. Recognize the limits and assumptions of statistical methods. Statistical methods require care in assessing
whether important conditions have been met. Failure to check assumptions often leads to misleading
conclusions and deceptive answers that border on unethical behavior.
5. Collaborate in the modeling process. Statistical modeling requires the collaboration of many players,
from those who gather data and build models to those who implement the results within the business
process. Students will participate in teams that develop and present statistical results. Central to these
skills is the ability to convey the implications of quantitative analysis upon business decisions.
Required Text Book(s)

Stine & Foster (2013). Statistics for Business: Decision Making and Analysis. Addison Wesley. Second
Edition.

Recommended Text Book(s)

o Foster, Stine, and Waterman (1998). Business Analysis using Regression. Springer.
o Foster, Stine, and Waterman (1998). Basic Business Statistics. Springer.
Software requirements for the course
JMP software will be required for the course.
Session-Wise Topics/Readings
S No.
1

Topic
Quality control and
sampling variation

Intended learning outcome

Role of independence
Properties of simple random samples
Shape of a distribution, including
recognizing deviations from normality.
Distinction between sample statistics and
population parameters
Role of normal distributions
Standard error of the mean and its use in
defining control charts
Consequences of Type I and Type II errors
Relevance of central limit theorem in
developing testing methods

References
SF, review Chapter 13-14
(Chapter 1-6 supply
background that may be
needed to review.)

Confidence
intervals

Interpretation of a confidence interval as a

method of describing a population
Design of a sampling method to obtain a
sought level of precision; margin of error
Identify key assumptions
Confidence interval for a proportion using a
normal model
Confidence interval for a mean using
methods that allow estimates of variation

SF, Chapter 15

Hypothesis tests

Relationship among hypothesis testing,

confidence intervals, and control charts
Choice of null and alternative hypotheses
and the connection to break-even analysis
Errors in testing and consequences for the
business manager
Tests for proportions and means
Distinguishing statistical significance from
substantive importance

SF, Chapter 16

Comparing two
samples

Use of randomized experiments in business

and the presence of confounding
Design of comparisons between two
samples and matched pairs
Procedures for comparing two samples
using proportions and means
Recognizing the role of dependence in the
design of comparisons

SF, Chapter 17

Linear regression
model

Using lines and curves to capture the

relationship between processes
Interpreting the parameters that define an
equation fit to data
Least squares estimation
Role of residuals in checking quality of fit
Summarizing the precision of a fitted model
Predicting new observations

SF, Chapter 19-20

The use of linear

regression in
business problems

Inference in
regression models

Introduction to
multiple regression

Collinearity and
inference in multiple
regression

10

Two-level
categorical
predictor variables
in regression

Review of linear regression models.

Assumptions and diagnostics.
Case studies illustrating the types of
business problems that simple regression
can address.
Prediction intervals for a new observation.
Confidence intervals for the regression line.
Hypothesis testing for the regression slope.
T-statistics, p-values and confidence
intervals.
Multiple regression model definition and
assumptions.
Marginal v. partial association.
Graphical diagnostics in multiple
regression: the scatterplot matrix, leverage
plots, Mahalanobis plot and the 3-D
scatterplot.
Definition of collinearity: consequences,
diagnostics and remedies.
Hypothesis testing in multiple regression: ttests, omnibus F-test and the Partial Ftest.
Review of assumptions in multiple
regression.
Making comparison between two groups.
Inference for a two-level categorical.
Parallel lines and interaction models.
Least squares means.

SF, Chapter 21-22

SF, Chapter 21-22

SF, Chapter 23

SF, Chapter 23-24

SF, Chapter 24
SF, Chapter 25

Evaluation Components
Team project

30%

Midterm exam

30%

Final exam

40%

Learning teams assigned by ISB will produce weekly analyses of data

from a business scenario. Teams will produce a concise written
report, and selected teams will present results in class. Collaboration
is not permitted outside the assigned student teams. Each team is
expected to produce its analysis without assistance from others.
Covers material from the first 4 classes; multiple choice format;
closed book
Covers material from the entire course, with emphasis on the final 6
classes (regression analysis)

Assignment Schedule
Name of the
Component

Date of Submission/
Deadline

Take-home
or in-class

Group
Assignment
(Y/N)

Project 1

May 2

TH

Project 2

May 9

TH

Project 3

May 22

TH

Project 4

May 29

TH

Instructions to students on word

limit/format of submission etc
Initial descriptive data analysis of
project data set for team.
Inference-based analysis of
variables in project data set.
Simple regression model for
project data set
Multiple regression model for
project data set

Coding
Scheme
2N-A or B
2N-A or B
2N-A or B
2N-A or B

Students can talk freely with others within their team about the project, but not with those from other
teams. Reference materials from the course (text, etc) are allowed, but we would not want them using
coursework submitted by prior students.

Attendance & Punctuality

Learning is an interactive process. ISB students are admitted partly based on the experiences they bring to the
learning community and what they can add to class discussions. Therefore attendance is an important aspect of
studying here. You have to be present in all the classes. Absence is only appropriate in cases of extreme
personal illness, injury, or close family bereavement. Voluntary activities such as job interviews, business school
competitions, travel plans, joyous family occasions, etc. are never valid reasons for missing any class. The
faculty with the assistance of the Academic Associate will keep track of your attendance and decide on the nature
and extent of penalty for any absence from the class. Penalty may include reduction in grade.

Coding scheme for ALL course work

References/Coding
Scheme

What kinds of collaborative activities are

allowed?
Can I discuss general
Can I discuss specific
concepts and ideas
issues associated
relevant to the
with the assignment
assignment with
with others?
others?

What material can be referred to?[1]

Can I refer to
external
material?[2]

Can I refer to the

case-study
solutions or
problem set
solutions?

4N

3N- a

3N-b

2N-a

2N-b

2N-c

1N

0N

As a general rule:

Students are responsible for submitting original work that reflects their own effort and interpretation.
Remember that any submission should be your own work and should not be copied in part or verbatim from
any other source whether external or internal.
An honour code violation is an honour code violation. A violation under coding scheme 0N is not less severe
than others. A 0N coding scheme submission is judged against a 0N coding scheme, and a 4N coding
scheme submission is judged against a 4N coding scheme; therefore, any honour code violation is equally
severe irrespective of the coding scheme of the submission.
Students can discuss cases and assignments with the course instructor and the Academic Associate for the
course.
Required and recommended textbooks for the course and the course pack can be used to answer any
individual or group assignment.
Although not all submissions may be subject to academic plagiarism checker (e.g. turn-it-in), in retrospect,
if the Honour Code committee feels the need, any of the previous submissions of an individual or a group
can be subjected to turn-it-in or any other academic plagiarism checker technology.
When in doubt, the student should contact the instructor for clarifications.

Evaluation and Grading Policy

Course Name
Professor Name
Academic Associate(s):

SMMD
Stine and Waterman
Santosh Kumar, Bitan Chakraborty

Grading Components

Marks will be released within __ days of

submission (Please Tick)

Soft Copy Submissions

(Please Tick)

3___
5___
not applicable
3___
5x___ 7_____
3___
5___
not applicable
5___ 7___ 10___
not applicable
5___ 7x___ 10___
After L5 and L10 ____
Only after L10
____

Y _______ N_________
Yx _______ N_________
Y _______ N_________
Y _______ N_________
Y _______ Nx_________

Individual Assignments
Group Assignments
Quiz
Term Report
Other (midterm exam)
CP

*All changes to course outline/submission deadlines/class schedule/grading to be posted on LMS.

*We request that all marks are revealed by first Wednesday of the next term.
*All grading timelines to be communicated to the students by end of Lecture 1.
*All components (except CP) revaluation policies will be similar to end term exam revaluation

policies.
*AA can inform ASA about any extra venue requirement 1 working day in advance