Name G M Firoz Khan

Roll No. 520931217

Program MBA
Statistics for Management
Subject
[Set 2]
Code MB 0024

Learning Systems Domain –Indira Nagar,

Centre Bangalore [2779]

Set 2 MB0024
1. What do you mean by sample survey? What are the
different sampling methods? Briefly describe them.

Sample is a finite subset of a population drawn from it to estimate the

characteristics of the population. Sampling is a tool which enables us to
draw conclusions about the characteristics of the population.

Survey sampling describes the process of selecting a sample of elements

from a target population in order to conduct a survey.
A survey may refer to many different types or techniques of observation,
but in the context of survey sampling it most often refers to a questionnaire
used to measure the characteristics and/or attitudes of people. The purpose
of sampling is to reduce the cost and/or the amount of work that it would
take to survey the entire target population. A survey that measures the
entire target population is called a census.

Sample survey can also be described as the technique used to study about
a population with the help of a sample. Population is the totality all objects
about which the study is proposed. Sample is only a portion of this
population, which is selected using certain statistical principles called
sampling designs (this is for guaranteeing that a representative sample is
obtained for the study). Once the sample decided information will be
collected from this sample, which process is called sample survey.

It is incumbent on the researcher to clearly define the target population.

There are no strict rules to follow, and the researcher must rely on logic and
judgment. The population is defined in keeping with the objectives of the
study.

Sometimes, the entire population will be sufficiently small, and the

researcher can include the entire population in the study. This type of
research is called a census study because data is gathered on every member
of the population.

Usually, the population is too large for the researcher to attempt to survey
all of its members. A small, but carefully chosen sample can be used to
represent the population. The sample reflects the characteristics of the
population from which it is drawn.

Sampling methods are classified as either probability or non-probability.

In probability samples, each member of the population has a known non-
zero probability of being selected. Probability methods include random
sampling, systematic sampling, and stratified sampling. In non-
probability sampling, members are selected from the population in some
non-random manner. These include convenience sampling, judgment
sampling, quota sampling, and snowball sampling. The advantage of
probability sampling is that sampling error can be calculated. Sampling error
is the degree to which a sample might differ from the population. When
inferring to the population, results are reported plus or minus the sampling

Set 2 MB0024
error. In non-probability sampling, the degree to which the sample differs
from the population remains unknown.

Probability Sampling Methods

1. Random sampling is the purest form of probability sampling. Each

member of the population has an equal and known chance of being
selected. When there are very large populations, it is often difficult or
impossible to identify every member of the population, so the pool of
available subjects becomes biased.
2. Systematic sampling is often used instead of random sampling. It is
also called an Nth name selection technique. After the required sample
size has been calculated, every Nth record is selected from a list of
population members. As long as the list does not contain any hidden
order, this sampling method is as good as the random sampling
method. Its only advantage over the random sampling technique is
simplicity. Systematic sampling is frequently used to select a specified
number of records from a computer file.
3. Stratified sampling is commonly used probability method that is
superior to random sampling because it reduces sampling error. A
stratum is a subset of the population that share at least one common
characteristic. Examples of stratums might be males and females, or
managers and non-managers. The researcher first identifies the
relevant stratums and their actual representation in the population.
Random sampling is then used to select a sufficient number of subjects
from each stratum. "Sufficient" refers to a sample size large enough for
us to be reasonably confident that the stratum represents the
population.

Stratified sampling is often used when one or more of the stratums in the
population have a low incidence relative to the other stratums.

Non Probability Methods

1. Convenience sampling is used in exploratory research where the

researcher is interested in getting an inexpensive approximation of the
truth. As the name implies, the sample is selected because they are
convenient. This non-probability method is often used during
preliminary research efforts to get a gross estimate of the results,
without incurring the cost or time required to select a random sample.

2. Judgment sampling is a common non-probability method. The

researcher selects the sample based on judgment. This is usually
extension of convenience sampling. For example, a researcher may
decide to draw the entire sample from one "representative" city, even
though the population includes all cities. When using this method, the
researcher must be confident that the chosen sample is truly
representative of the entire population.

3. Quota sampling is the non-probability equivalent of stratified

sampling. Like stratified sampling, the researcher first identifies the

Set 2 MB0024
 stratums and their proportions as they are represented in the
population. Then convenience or judgment sampling is used to select
the required number of subjects from each stratum. This differs from
stratified sampling, where the stratums are filled by random sampling.

4. Snowball sampling is a special non-probability method used when the

desired sample characteristic is rare. It may be extremely difficult or
cost prohibitive to locate respondents in these situations. Snowball
sampling relies on referrals from initial subjects to generate additional
subjects. While this technique can dramatically lower search costs, it
comes at the expense of introducing bias because the technique itself
reduces the likelihood that the sample will represent a good cross
section from the population.

2. What is the different between correlation and

regression? What do you understand by Rank
Correlation? When we use rank correlation and when we
use Pearsonian Correlation Coefficient? Fit a linear
regression line in the following data –

X 12 15 18 20 27 34 28 48
Y 123 150 158 170 180 184 176 130

Correlation

When two or more variables move in sympathy with other, then they are
said to be correlated. If both variables move in the same direction then they
are said to be positively correlated. If the variables move in opposite
direction then they are said to be negatively correlated. If they move
haphazardly then there is no correlation between them.
Correlation analysis deals with
1) Measuring the relationship between variables.
2) Testing the relationship for its significance.
3) Giving confidence interval for population correlation measure.

Regression
Regression is defined as, “the measure of the average relationship between
two or more variables in terms of the original units of the data.” Correlation
analysis attempts to study the relationship between the two variables x and
y. Regression analysis attempts to predict the average x for a given y. In
Regression it is attempted to quantify the dependence of one variable on the
other. The dependence is expressed in the form of the equations.

Different between correlation and regression

Correlation and linear regression are not the same. Consider these
differences:

Set 2 MB0024
• Correlation quantifies the degree to which two variables are related.
Correlation does not find a best-fit line (that is regression). You simply
are computing a correlation coefficient (r) that tells you how much one
variable tends to change when the other one does.

• With correlation you don't have to think about cause and effect. You
simply quantify how well two variables relate to each other. With
regression, you do have to think about cause and effect as the
regression line is determined as the best way to predict Y from X.

• With correlation, it doesn't matter which of the two variables you call "X"
and which you call "Y". You'll get the same correlation coefficient if you
swap the two. With linear regression, the decision of which variable you
call "X" and which you call "Y" matters a lot, as you'll get a different
best-fit line if you swap the two. The line that best predicts Y from X is
not the same as the line that predicts X from Y.

• Correlation is almost always used when you measure both variables. It

rarely is appropriate when one variable is something you experimentally
manipulate. With linear regression, the X variable is often something you
experimental manipulate (time, concentration...) and the Y variable is
something you measure.

• The correlation answers the STRENGTH of linear association between

paired variables, say X and Y. On the other hand, the regression tells us
the FORM of linear association that best predicts Y from the values of X.

(2a) Correlation is calculated whenever:

- Both X and Y is measured in each subject and quantifies how much

they are linearly associated.
- In particular the Pearson's product moment correlation coefficient is
used when the assumption of both X and Y are sampled from
normally-distributed populations are satisfied
- Or the Spearman's moment order correlation coefficient is used if the
assumption of normality is not satisfied.
- Correlation is not used when the variables are manipulated, for
example, in experiments.

(2b) linear regression is used whenever:

- At least one of the independent variables (Xi's) is to predict the

dependent variable Y. Note: Some of the Xi's are dummy variables,
i.e. Xi = 0 or 1, which are used to code some nominal variables.
- If one manipulates the X variable, e.g. in an experiment.

• Linear regression are not symmetric in terms of X and Y. That is

interchanging X and Y will give a different regression model (i.e. X in
terms of Y) against the original Y in terms of X.

Set 2 MB0024
 On the other hand, if you interchange variables X and Y in the
calculation of correlation coefficient you will get the same value of this
correlation coefficient.
• The "best" linear regression model is obtained by selecting the variables
(X's) with at least strong correlation to Y, i.e. >= 0.80 or <= -0.80

• The same underlying distribution is assumed for all variables in linear

regression. Thus, linear regression will underestimate the correlation of
the independent and dependent when they (X's and Y) come from
different underlying distributions.

Spearman's rank correlation coefficient or Spearman's rho, named

after Charles Spearman and often denoted by the Greek letter ρ (rho) or as
rs, is a nonparametric measure of correlation – that is, it assesses how well
an arbitrary monotonic function could describe the relationship between two
variables, without making any other assumptions about the particular nature
of the relationship between the variables. Certain other measures of
correlation are parametric in the sense of being based on possible
relationships of a parameterized form, such as a linear relationship.

In principle, ρ is simply a special case of the Pearson product-moment

coefficient in which two sets of data Xi and Yi are converted to rankings xi
and yi before calculating the coefficient. In practice, however, a simpler
procedure is normally used to calculate ρ. The raw scores are converted to
ranks, and the differences di, between the ranks of each observation on the
two variables are calculated.

If there are no tied ranks, then ρ is given by:

Where:
di = xi − yi = the difference between the ranks of corresponding values Xi
and Yi, and
n = the number of values in each data set (same for both sets).
If tied ranks exist, classic Pearson's correlation coefficient between ranks
has to be used instead of this formula.

One has to assign the same rank to each of the equal values. It is an
average of their positions in the ascending order of the values.

Conditions under which P.E can be used:

Set 2 MB0024
1. Samples should be drawn from a normal population.

2. The value of “r” must be determined from sample values.

3. Samples must have been selected at random.

3. What do you mean by business forecasting? What are

the different methods of business forecasting? Describe
the effectiveness of time-series analysis as a mode of
business forecasting. Describe the method of moving
averages.

Business forecasting refers to the analysis of past and present economic

conditions with the object of drawing inferences about probable future
business conditions. To forecast the future, various data, information and
facts concerning to economic condition of business for past and present are
analyzed. The process of forecasting includes the use of statistical and
mathematical methods for long term, short term, medium term or any
specific term.

Following are the main methods of business forecasting:-

1. Business Barometers

Business indices are constructed to study and analyze the business activities
on the basis of which future conditions are predetermined. As business
indices are the indicators of future conditions, so they are also known as
“Business Barometers” or “Economic Barometers‟. With the help of these

Set 2 MB0024
business barometers the trend of fluctuations in business conditions are
made known and by forecasting a decision can be taken relating to the
problem. The construction of business barometer consists of gross national
product, wholesale prices, consumer prices, industrial production, stock
prices, bank deposits etc. These quantities may be converted into relatives
on a certain base. The relatives so obtained may be weighted and their
average be computed. The index thus arrived at in the business barometer.

The business barometers are of three types:

i. Barometers relating to general business activities: it is also known as

general index of business activity which refers to weighted or
composite indices of individual index business activities. With the help
of general index of business activity long term trend and cyclical
fluctuations in the „economic activities of a country are measured but
in some specific cases the long term trends can be different from
general trends. These types of index help in formation of country
economic policies.
ii. Business barometers for specific business or industry: These
barometers are used as the supplement of general index of business
activity and these are constructed to measure the future variations in
a specific business or industry.
iii. Business barometers concerning to individual business firm: This type
of barometer is constructed to measure the expected variations in a
specific individual firm of an industry.

2. Time Series Analysis is also used for the purpose of making business
forecasting. The forecasting through time series analysis is possible only
when the business data of various years are available which reflects a
definite trend and seasonal variation.

3. Extrapolation is the simplest method of business forecasting. By

extrapolation, a businessman finds out the possible trend of demand of his
goods and about their future price trends also. The accuracy of extrapolation
depends on two factors:
i) Knowledge about the fluctuations of the figures,
ii) Knowledge about the course of events relating to the problem under
consideration.

4. Regression Analysis
The regression approach offers many valuable contributions to the solution
of the forecasting problem. It is the means by which we select from among
the many possible relationships between variables in a complex economy
those which will be useful for forecasting. Regression relationship may
involve one predicted or dependent and one independent variables simple
regression, or it may involve relationships between the variable to be
forecast and several independent variables under multiple regressions.
Statistical techniques to estimate the regression equations are often fairly
complex and time-consuming but there are many computer programs now
available that estimate simple and multiple regressions quickly.

Set 2 MB0024
5. Modern Econometric Methods
Econometric techniques, which originated in the eighteenth century, have
recently gained in popularity for forecasting. The term econometrics refers
to the application of mathematical economic theory and statistical
procedures to economic data in order to verify economic theorems. Models
take the form of a set of simultaneous equations. The value of the constants
in such equations is supplied by a study of statistical time series.

6. Exponential Smoothing Method

This method is regarded as the best method of business forecasting as

compared to other methods. Exponential smoothing is a special kind of
weighted average and is found extremely useful in short-term forecasting of
inventories and sales.

7. Choice of a Method of Forecasting

The selection of an appropriate method depends on many factors – the
context of the forecast, the relevance and availability of historical data, the
degree of accuracy desired, the time period for which forecasts are required,
the cost benefit of the forecast to the company, and the time available for
making the analysis.

Effectiveness of Time Series Analysis:

Time series analysis is also used for the purpose of making business
forecasting. The forecasting through time series analysis is possible only
when the business data of various years are available which reflects a
definite trend and seasonal variation. By time series analysis the long term
trend, secular trend, seasonal and cyclical variations are ascertained,
analyzed and separated from the data of various years.

Merits:

i) It is an easy method of forecasting.

ii) By this method a comparative study of variations can be made.
iii) Reliable results of forecasting are obtained as this method is based on
mathematical model.

Method of Moving Averages

One of the most simple and popular technical analysis indicators is the
moving averages method. This method is known for its flexibility and user-
friendliness. This method calculates the average price of the currency or
stock over a period of time.

The term “moving average” means that the average moves or follows a
certain trend. The aim of this tool is to indicate to the trader if there is a
beginning of any new trend or if there is a signal of end to the old trend.
Traders use this method, as it is relatively easy to understand the direction
of the trends with the help of moving averages.

Set 2 MB0024
Moving average method is supposed to be the simplest one, as it helps to
understand the chart patterns in an easier way. Since the currency’s
average price is considered, the price’s volatile movements are evened. This
method rules out the daily fluctuation in the prices and helps the trader to
go with the right trend, thus ensuring that the trader trades in his own
good.

We come across different types of moving averages, which are based on the
way these averages are computed. Still, the basis of interpretation of
averages is similar across all the types. The computation of each type set
itself different from other in terms of weightage it lays on the prices of the
currencies. Current price trend is always given a higher weightage. The
three basic types of moving averages are viz. simple, linear and exponential.

A simple moving average is the simplest way to calculate the moving price
averages. The historical closing prices over certain time period are added.
This sum is divided by the number of instances used in summation. For
example, if the moving average is calculated for 15 days, the past 15
historical closing prices are summed up and then divided by 15. This method
is effective when the number of prices considered is more, thus enabling the
trader to understand the trend and its future direction more effectively.

A linear moving average is the less used one out of all. But it solves the
problem of equal weightage. The difference between simple average and
linear average method is the weightage that is provided to the position of
the prices in the latter. Let’s consider the above example. In linear average
method, the closing price on the
15th day is multiplied by 15, the 14th day closing price by 14 and so on till
the 1st day closing price by 1. These results are totalled and then divided by
15.

The exponential moving average method shares some similarity with the
linear moving average method. This method lays emphasis on the
smoothing factor, there by weighing recent data with higher points than the
previous data. This method is more receptive to any market news than the
simple average method. Hence this makes exponential method more
popular among traders.

Moving averages methods help to identify the correct trends and their
respective levels of resistance.

4. What is definition of Statistics? What are the different

characteristics of statistics? What are the different
functions of Statistics? What are the limitations of
Statistics?

According to Croxton and Cowden, ‘Statistics is the science of collection,

presentation, analysis and interpretation of numerical data.’ Thus, Statistics
contains the tools and techniques required for the collection, presentation,

Set 2 MB0024
analysis and interpretation of data. This definition is precise and
comprehensive.

Characteristic of Statistics

a. Statistics Deals with aggregate of facts: Single figure cannot be analyzed.

b. Statistics are affected to a marked extent by multiplicity of causes: The
statistics of yield of paddy is the result of factors such as fertility of soil,
amount of rainfall, quality of seed used, quality and quantity of fertilizer
used, etc.
c. Statistics are numerically expressed: Only numerical facts can be
statistically analyzed. Therefore, facts as ‘price decreases with increasing
production’ cannot be called statistics.
d. Statistics are enumerated or estimated according to reasonable standards
of accuracy: The facts should be enumerated (collected from the field) or
estimated (computed) with required degree of accuracy. The degree of
accuracy differs from purpose to purpose. In measuring the length of
screws, an accuracy upto a millimetre may be required, whereas, while
measuring the heights of students in a class, accuracy upto a centimetre is
enough.
e. Statistics are collected in a systematic manner: The facts should be
collected according to planned and scientific methods. Otherwise, they are
likely to be wrong and misleading.
f. Statistics are collected for a pre-determined purpose: There must be a
definite purpose for collecting facts.
Eg. Movement of wholesale price of a commodity
g. Statistics are placed in relation to each other: The facts must be placed in
such a way that a comparative and analytical study becomes possible.
Thus, only related facts which are arranged in logical order can be called
statistics.

Functions of Statistics

1. It simplifies mass data

2. It makes comparison easier
3. It brings out trends and tendencies in the data
4. It brings out hidden relations between variables.
5. Decision making process becomes easier.

Major limitations of Statistics are:

1. Statistics does not deal with qualitative data. It deals only with
quantitative data.
2. Statistics does not deal with individual fact: Statistical methods can be
applied only to aggregate to facts.
3. Statistical inferences (conclusions) are not exact: Statistical inferences
are true only on an average. They are probabilistic statements.
4. Statistics can be misused and misinterpreted: Increasing misuse of
Statistics has led to increasing distrust in statistics.
5. Common men cannot handle Statistics properly: Only statisticians can
handle statistics properly.

Set 2 MB0024
5. What are the different stages of planning a statistical
survey? Describe the various methods for collecting data
in a statistical survey.
The planning stage consists of the following sequence of activities.

1. Nature of the problem to be investigated should be clearly defined in an

un- ambiguous manner.
2. Objectives of investigation should be stated at the outset. Objectives
could be to obtain certain estimates or to establish a theory or to verify
a existing statement to find relationship between characteristics etc.
3. The scope of investigation has to be made clear. It refers to area to be
covered, identification of units to be studied, nature of characteristics to
be observed, accuracy of measurements, analytical methods, time, cost
and other resources required.
4. Whether to use data collected from primary or secondary source should
be determined in advance.
5. The organization of investigation is the final step in the process. It
encompasses the determination of number of investigators required,
their training, supervision work needed, funds required etc.

Collection of primary data can be done by anyone of the following methods.

i. Direct personal observation

ii. Indirect oral interview
iii. Information through agencies
iv. Information through mailed questionnaires
iv. Information through schedule filled by investigators

6. What are the functions of classification? What are the

requisites of a good classification? What is Table and
describe the usefulness of a table in mode of
presentation of data?

The functions of classification are:

a. It reduce the bulk data

b. It simplifies the data and makes the data more comprehensible
c. It facilitates comparison of characteristics
d. It renders the data ready for any statistical analysis

Requisites of good classification are:

i. Unambiguous: It should not lead to any confusion

ii. Exhaustive: every unit should be allotted to one and only one class
iii. Mutually exclusive: There should not be any overlapping.

Set 2 MB0024
 iv. Flexibility: It should be capable of being adjusted to changing
situation.
v. Suitability: It should be suitable to objectives of survey.
vi. Stability: It should remain stable throughout the investigation
vii. Homogeneity: Similar units are placed in the same class.
viii. Revealing: Should bring out essential features of the collected data.

Table is nothing but logical listing of related data in rows and columns.
Objectives of tabulation are:-

i. To simplify complex data

ii. To highlight important characteristics
iii. To present data in minimum space
iv. To facilitate comparison
v. To bring out trends and tendencies
vi. To facilitate further analysis

Set 2 MB0024