Lahore University of Management Sciences DISC 203 Probability and Statistics

Fall 2013-14

Instructor Room No. Office Hours Email Telephone Ext. Secretary TA Office Hours Course URL (if any)

Muhammad Asim 4-39 SDSB Building MW 11:00 12:30 Muhammad.asim@lums.edu.pk 5232 Abdul Basit TBA www.lms.lums.edu.pk

Course Basics Credit Hours Lecture(s) Recitation/Lab (per week) Tutorial (per week) Course Distribution Core Elective Open for Student Category Close for Student Category

4 Nbr of Lec(s) Per Week Nbr of Lec(s) Per Week Nbr of Lec(s) Per Week

2 N/A 1

Duration Duration Duration

100 minutes N/A 75 minutes

Yes

COURSE DESCRIPTION This course is designed to provide students majoring in management, finance and other fields of business administration with an introductory survey of the many applications of descriptive and inferential statistics. We first review techniques for organizing and presenting the raw data and elementary probability theory. Next, we discuss various techniques to make inferences. Basic probability theory, sampling distribution and central limit theorem shall be discussed. The idea of central limit theorem will naturally lead towards the confidence intervals and hypothesis tests for mean and proportion. We follow this discussion with single and multiple regression analysis, model building, and design of experiments. COURSE PREREQUISITE(S) Calculus I or Pre-Calculus

COURSE OBJECTIVES To develop statistical thinking and introduce students to the theory of inferential statistics To enable students to accomplish empirical projects by using appropriate statistical methods To enable students to critically assess statistical studies To serve as a sound foundation for Econometrics and advanced courses in Finance and Management

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Learning Outcomes By the end of the course, students should be able to: use a software for statistical analysis of data summarize the data in a useful and informative manner use the basic concepts of probability and random variables explain the concept of the sampling distribution of a static, and in particular describe the behavior of the sample mean describe the foundations of classical inference involving confidence intervals and hypothesis testing and apply inferential methods apply modeling techniques in simple and multiple linear regression analysis discuss critical elements in the design of a sampling experiment and analyze designed experiments using analysis of variance analyze count data with two or more categories

Grading Breakup and Policy Assignment(s): 10 % Home Work: Quiz(s): 20 % Class Participation: Attendance: 10 % Midterm Examination: 25% Project: Final Examination: 35%

Examination Detail Yes/No: Yes Combine Separate: Combine Duration: 100 minutes Preferred Date: Exam Specifications: closed book, closed notes, calculators allowed Yes/No: Yes Combine Separate: Combine Duration: 100 minutes Exam Specifications: closed book, closed notes, calculators allowed

Midterm Exam

Final Exam

COURSE OVERVIEW Lecture 1 Topics Statistics, Data and Statistical Thinking The Science of Statistics; Types of Statistical Applications in Business; Fundamental Elements of Statistics; Types of Data Methods of Describing Sets of Data Graphical Methods; Summation Notation; Central Tendency; Variability; Relative Standing; Standard Deviation; Distorting the Truth with Descriptive Techniques Recommended Readings Chapter 1 Objectives Understand the nature and scope of Statistics Choose a suitable way of presenting raw Statistical Data Discuss the advantages and disadvantages of different ways of representing data Calculate and interpret measures of central tendency and variability Describe data using Excel and Stata

Chapter 2

2&3

Lab Session

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5&6 Probability Events, Sample Spaces and Probability; Unions and Intersections; Complementary Events; The Additive Rule and Mutually Exclusive Events; Conditional Probability; The Multiplicative Rule and Independent Events; Random Sampling; Bayes Rule Random Variables and Probability Distributions Two Types of Random Variables: Discrete Random Variables: Probability Distributions for Discrete Random Variables; Expected Values of Discrete Random Variables; The Binomial Random Variable; The Poisson Random Variable Continuous Random Variables: Probability Distributions for Continuous Random Variables; The Uniform Distribution; The Normal Distribution; Approximating a Binomial Distribution with a Normal Distribution; The Exponential Distribution Sampling Distributions: The Concept of Sampling Distributions; Properties of Sampling Distributions: Unbiasedness and Minimum Variance; The Sampling Distribution of the Sample Mean Chapter 3 Chapter 4 Chapter 5 Describe the sample space for certain random experiments Compute probabilities Understand the notion of Random Sampling Find probabilities for distributions over discrete sets Calculate the mean and variance of a discrete random variable Recognize cases where Binomial Distribution could be an appropriate model; compute probabilities for a Binomial Distribution and approximate Binomial probabilities using a Normal Distribution; Find probabilities for continuous distributions Use the key properties of the Normal Distributions Recognize cases where Poisson, Uniform and Exponential Distributions could be appropriate and compute corresponding probabilities Describe properties of the sampling distribution of sample mean Understand and apply Central Limit Theorem Calculate and interpret Confidence Intervals and Confidence Levels Remember steps in Classical Hypothesis testing Describe Type I and Type II Errors Conduct Tests of Hypothesis according to a given situation and interpret the results.

7, 8, 9 & 10

Chapter 6

Inference Based on a Single Sample: Estimation with Confidence Intervals Large-Sample Confidence interval for a Population Mean; Small-Sample Confidence Interval for a Population Mean; Large-Sample Confidence Interval for a Population Proportion; Determining the sample size; Sample Survey Designs Tests of Hypothesis The Elements of a Test of Hypothesis; Large-Sample Test of Hypothesis About a Population Mean; Small-Sample Test of Hypothesis About a Population Mean; Large-Sample Test of Hypothesis About a Population Proportion; Observed Significance Levels: p-values Midterm Exam Inference Based on Two Samples Comparing Two Population Means: Independent Sampling; Comparing Two Population Means: Paired Difference Experiments; Comparing Two Population Proportions: Independent Sampling; Determining the Sample Size; Comparing Two Population Variances: Independent Sampling Simple Linear Regression Probabilistic Models; Fitting the Model: The Least Squares Approach; Model Assumptions; Assessing the Utility of the Model: Making Inference about the Slope; The Coefficients of Correlation and Determination; Using the Model for Estimation and Prediction Chapter 8

Chapter 7

11 , 12 & 13

14

Chapter 9

15 & 16

Apply Classical Hypothesis Testing to compare two populations and draw inference

Chapter 10

17 & 18

Define the concept of least squares estimation in linear regression Explain why correlation need not necessarily imply causation Evaluate the fit of a linear model Conduct inference for the slope and intercept parameters

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Lab Session 19 Multiple Regression and Model Building 20 & 21 Multiple Regression Multiple Regression: The Model and the Procedure; The Least Squares Approach; Model assumptions; Inference About the Slope Parameters; Checking the Usefulness of the 2 Model: R and the Analysis of Variance F-Test; Using the Model for Estimation and Prediction, Residual Analysis: Checking the Regression Assumptions Model Building The Two Types of Independent Variables: Quantitative and Qualitative; Models with a Single Quantitative Independent Variable; Models with Two or More Quantitative Independent Variables; Testing Portions of a Model; Models with One Qualitative Independent Variable; Comparing the Slopes of Two or More Lines; Comparing Two or More Response Curves; Stepwise Regression Lab Session Design of Experiments Elements of a Designed Experiment; The Completely Randomized Design: Single Factor; Multiple Comparisons of Means; Factorial Experiments Categorical Data Analysis: The Chi-Square Test and the Analysis of Contingency Tables The Multinomial Distribution; Contingency Tables; A Word of Caution About Chi-Square Tests Review Chapter 11 Fit a linear regression model using Excel and Stata, do post-estimation analysis and explain computer output Define the concept of Least Squares Regression in Multiple Regression Test the utility of a Multiple Regression Model and use it for estimation and prediction Interpret the results of a Multiple Regression Model and draw inference Understand how to select a model that is appropriate for given data

22 & 23

Chapter 12

24 25 & 26

Chapter 15 Chapter 17

Use Excel and Stata for Multiple Regression Analysis Discuss the critical elements in the design of a sampling experiment Analyze designed experiments Use Multinomial Distribution Construct Contingency Tables Conduct Chi-Squared Test

27 28

Textbook(s)/Supplementary Readings Required Text: James McClave, P.George Benson, Terry Sincich. Statisitcs for Business and Economics. 7th Edition. Prentice Hall, NJ. 1998. Datasets at: http://media.pearsoncmg.com/ph/esm/statistics_datasets/stats_datasets.html#mcclave3