251solnG2 1/31/08 (Open this document in 'Page Layout' view!

) 1

G. Measures of Dispersion and Asymmetry.

1. Range
Downing & Clark, problem 7 above (Use data to find IQR). Review solutions and terms on page 41 (36 in 3 rd ed.) of Downing & Clark.
2. The Variance and Standard Deviation of Ungrouped Data.
Text exercises 3.1b, 3.2b, 3.6, 3.37, 3.24 [3.1b, 3.2b, 3.7, 3.37, 3.23] (3.1b, 3.2b, 3.7, 3.23, 3.33)
3. The Variance and Standard Deviation of Grouped Data.
Text exercises 3.28, 3.30 (3.68, 3.70) (work 3.30 in thousands), Downing & Clark pg 42 or 37, problems 6,7 (Find sample standard
deviation hint: run problem 6 in hundreds) (Note that you can use the Excel or Minitab techniques in the graded assignment to compute
and sum the fx and fx 2 columns in problems 6 and 7. ), Problems G1, G2. Graded Assignment 1

4. Skewness and Kurtosis.

Find the standard deviation, coefficient of variation and measures of skewness in Text problem 3.1, 3.2. Problems G3A, G4 (See
251wrksht).
5. Review
a. Grouped Data.
b. Ungrouped Data.

Section 3 is in this document.

---------------------------------------------------------------------------------------------------------------------------- .
Exercise 3.28 (Formerly 3.68): The following data is given. Find a) the mean and b) the variance.
Class Intervals f
0 - under 10 10
10 - under 20 20
20 - under 30 40
30 - under 40 20
40 - under 50 10
Total 100
Solution: Of course, it is unnecessary to do everything in the table below, but you should know how to do
the problem using both computational and definitional formulas.

class f fx 2 x x f x x f x x
2
x fx
0-10 10 5 50 250 -20 -200 4000
10-20 20 15 300 4500 -10 -200 2000
20-30 40 25 1000 25000 0 0 0
30-40 20 35 700 24500 10 200 2000
40-50 10 45 450 20250 20 200 4000
100 2500 74500 0 12000

So f n 100 , fx 2500 , fx 2 74500 ,

a) x fx 2500 25 and, using the computational formula,

n 100

s2
fx 2 nx 2

74600 100 25 2
12000
121.21212 .
n 1 100 1 99
251solnG2 1/31/08 (Open this document in 'Page Layout' view!) 2

Or using the definitional formula s 2 f x x 2

12000
121.21212 . So
n 1 99
s 11 .0096
s 121.21212 11 .0096 and C 0.4404 .
x 25

Exercise 3.30 (Formerly 3.70): The following sample data is given. f M is frequency in March, f A in
April. Find a) the means and b) the standard deviations. c) Have these statistics changed substantially
between the months?

Class Intervals fM fA
$0 - under $2000 6 10
$2000 - under $4000 13 14
$4000 - under $5000 17 13
$5000 - under $8000 10 10
$8000 - under $10000 4 0
$10000 - under $12000 0 3
Total 50 50
Solution: Note that the intervals are not even. Only computational formulas are used below. Numbers are
in thousands.
class fM x fM x fM x2 fA x f Ax f Ax2
0- 2 6 1 6.0 6.00 10 1.0 10.0 10.00
2- 4 13 3 39.0 117.00 14 3.0 42.0 126.00
4- 5 17 4.5 76.5 344.25 13 4.5 58.5 263.25
5- 8 10 6.5 65.0 422.50 10 6.5 65.0 422.50
8-10 4 9 36.0 324.00 0 9.0 0.0 0.00
10-12 0 11 0.0 0.00 3 11.0 33.0 363.00
50 222.5 1213.75 50 208.5 1184.75

So f n 50 , f M x 222.5 , f M x 2 1213.75 , f Ax 208.5 and

f Ax
2
1184 .75 .

a) x M f M x
222.5

4.45 x A
f Ax

208.5
4.17
n 50 n 50
b ) Using the computational formula,
2
sM
f M x 2 nx M
2

1213.75 50 4.45 2
223.625
4.56378 . So
n 1 50 1 49
sM 4.56378 2.1363 .

s 2A
f Ax
2
nx A2

11184 .75 50 4.17 2
315.305
6.43480 . So
n 1 50 1 49
sA 4.56378 2.5367
Though the mean has fallen somewhat (6%), there are more items in both the largest and smallest
categories, making the standard deviation larger (by 19%).
251solnG2 1/31/08 (Open this document in 'Page Layout' view!) 3

Downing and Clark, pg. 37, Application 6: Find sample standard deviation of the data below hint: run
problem 6 in hundreds). The given data is group number, (group), frequency: 1, ( 0-1000), 12; 2, (1000-
2000), 15; 3, (2000-3000), 19; 4, (3000-4000), 22; 5, (4000-5000), 30; 6, (5000-6000), 56; 7, (6000-
7000), 48; 8, (7000-8000), 40; 9, (8000-9000), 30; 10, (9000-10000), 16; 11, (10000-11000), 4; 12,
(11000-12000), 2.
Solution: To use the computational method, construct the following table. Note that we have converted the
data into hundreds so that the group (2000-3000) is treated as (20-30). This means that the fx column is
in hundreds, the fx 2 column is in 100 2 ten thousands and the fx 3 column is in 100 3
millions.
Row group f x fx fx 2 fx 3
1 0-1000 12 5 60 300 1500
2 1000-2000 15 15 225 3375 50625
3 2000-3000 19 25 475 11875 296875
4 3000-4000 22 35 770 26950 943250
5 4000-5000 30 45 1350 60750 2733750
6 5000-6000 56 55 3080 169400 9317000
7 6000-7000 48 65 3120 202800 13182000
8 7000-8000 40 75 3000 225000 16875000
9 8000-9000 30 85 2550 216750 18423750
10 9000-10000 16 95 1520 144400 13718000
11 10000-11000 4 105 420 44100 4630500
12 11000-12000 2 115 230 26450 30417500
294 16800 1132150

So f n 294 , fx 16800 , fx 2
1132150 , x fx 16800 57.142857
n 294
(in hundreds so actually 5714.2857) and, using the computational formula to find the sample variance ,

s2
fx 2 nx 2

1132150 294 57.142857 2

172150
587.54266 (in 100 ten
2

n 1 294 1 293
thousands). So s 587.54266 24.2393 (in hundreds so actually 2423.93) and
s
C 24.2393 0.4242 .
x 57.142857
Downing and Clark, pg. 37, Application 7: Find sample standard deviation of the data given in the first
three columns below.
Row group f x fx fx 2 fx 3
1 0-10 122 5 610 3050 15250
2 10-20 180 15 2700 40500 607500
3 20-30 256 25 6400 160000 4000000
4 30-40 350 35 12250 428750 15006250
5 40-50 311 45 13995 629775 28339876
6 50-60 278 55 15290 840950 46252248
7 60-70 250 65 16250 1056250 68656248
8 70-80 211 75 15825 1186875 89015624
9 80-90 180 85 15300 1300500 110542496
10 90-100 175 95 16625 1579375 150040624
11 100-110 143 105 15015 1576575 165540368
12 110-120 120 115 13800 1587000 182504992
13 120-130 106 125 13250 1656250 207031248
14 130-140 99 135 13365 1804275 243577120
15 140-150 97 145 14065 2039425 295716640
16 150-160 75 155 11625 1801875 279290624
Total 2953 196365 17691424 1886137088
251solnG2 1/31/08 (Open this document in 'Page Layout' view!) 4

So f n 2953 , fx 196365 and fx 2

17691424 . This means

x
fx 196365 66.496783 and, using the computational formula to find the sample variance
n 2953

, s2 fx nx 2
2
17691424 2953 66.496783 2

4633783.2
1569.7098 . So
n 1 2953 1 2952
s 1569.7098 39.6196 .

Problem G1: If the mean return for an industry is 10% with a standard deviation of 6%, out of 100 firms
how many do you expect to have returns above 22%?
1
Solution: Use Chebyshef's Rule. For any number k greater than 1, at least 1 of the points will
k2
1
fall within k standard deviations of the mean (i. e. in the interval k ) and no more than of the
k2
points will fall beyond k standard deviations of the mean . Note that 22% is above the mean by a number
12 12
of standard deviations. Since x 22 10 12 and 2 , k 2. If the proportion in the
6
1 1 1 1
tails is no more than 2
, we can compute 2
2
and conclude that at most one quarter of the
k k 2 4
points are above 22%. This would be 25 firms.

Problem G2: If the mean is 5 and the standard deviation is 2, find an interval that must contain at least
the central two-thirds of the observations.

Solution: Again use Chebyshef's Rule. If we want a central interval with no less than 1/3 of the
1 1
observations, then the tails must contain at most 1/3. So we can say that 2 . So k 2 3 , which
k 3
means that k 3 1.732 . We know that 5 and 2 , so that our interval is k
5 1.732 2 5 3.464 , or 1.536 to 8.464.