Measures of Dispersion

Requisites for an Ideal Measures of Dispersion

 It should be rigidly defined

 It should be easy to understand and easy to calculate
 It should be based on all the observations of the data
 It should be amenable to further algebraic treatment
 It should be least affected by the sampling fluctuations
 It should not be unduly affected by the extreme values

Absolute Measures of Dispersion

These measures give us an idea about the amount of dispersion in a set of

observations. They give the answers in the same units as the units of the original
observations. When the observations are in kilograms, the absolute measure is also
in kilograms. If we have two sets of observations, we cannot always use the
absolute measures to compare their dispersions. The absolute measures which are
commonly used are:

1. The Range
2. The Quartile Deviation
3. The Mean Deviation
4. The Standard Deviation and Variance

Relative Measures of Dispersion

These measures are calculated for the comparison of dispersion in two or more sets
of observations. These measures are free of the units in which the original data is
measured. If the original data is in dollars or kilometers, we do not use these units
with relative measures of dispersion. These measures are a sort of ratio and are
called coefficients. Each absolute measure of dispersion can be converted into its
relative measure. Thus the relative measures of dispersion are:

1. Coefficient of Range or Coefficient of Dispersion

2. Coefficient of Quartile Deviation or Quartile Coefficient of Dispersion
3. Coefficient of Mean Deviation or Mean Deviation of Dispersion
4. Coefficient of Standard Deviation or Standard Coefficient of Dispersion
 5. Coefficient of Variation (a special case of Standard Coefficient of Dispersion)

Range

Range is defined as the difference between the maximum and the minimum
observation of the given data. If x m denotes the maximum observation and x 0
denotes the minimum observation, then the range is defined as

Range = x m - x 0

It is the simplest measure of dispersion. It gives a general idea about the total
spread of the observations. It does not enjoy any prominent place in statistical
theory, but it has its application and utility in quality control methods which are used
to maintain the quality of products produced in factories.

Merits
 It is easy to calculate and simple to understand
 It is based only on two extreme observations
 In statistical quality control, charts based on range are widely used
 In weather forecast, share markets, mutual funds range as a measure is used

Demerits
 Range is appropriate for small datasets
 Two or more datasets may have same range but, still may vary a lot
 It is affected greatly by fluctuations of sampling
 It is not based on all the observations of the series
 It cannot be used in case of open-end distribution

Coefficient of Range

This is a relative measure of dispersion and is based on the value of the range. It is
also called range coefficient of dispersion. It is defined as:

Example
The following are the wages of 8 workers in a factory. Find the range and coefficient
of range. Wages are in dollars: 1400, 1450, 1520, 1380, 1485, 1495, 1575, and
1440.
 Quartile Deviation

The quartile deviation is a slightly better measure of absolute dispersion than the
range, but it ignores the observations on the tails. If we take difference samples from
a population and calculate their quartile deviations, their values are quite likely to be
sufficiently different. This is called sampling fluctuation, and it is not a popular
measure of dispersion. The quartile deviation calculated from the sample data does
not help us to draw any conclusion (inference) about the quartile deviation in the
population.

Coefficient of Quartile Deviation

A relative measure of dispersion based on the quartile deviation is called the

coefficient of quartile deviation. It is defined as:

It is a pure number free of any units of measurement. It can be used for comparing
the dispersion of two or more sets of data.

Example
The wheat production (in Kg) of 20 acres is given as: 1120, 1240, 1320, 1040, 1080,
1200, 1440, 1360, 1680, 1730, 1785, 1342, 1960, 1880, 1755, 1720, 1600, 1470,
1750, and 1885. Find the quartile deviation and coefficient of quartile deviation.
After arranging the observations in ascending order, we get

1040, 1080, 1120, 1200, 1240, 1320, 1342, 1360, 1440, 1470, 1600, 1680, 1720,
1730, 1750, 1755, 1785, 1880, 1885, 1960.

Mean Deviation

The mean deviation or the average deviation is defined as the mean of the absolute
deviations of observations from some suitable average which may be the arithmetic
mean, the median or the mode. The mean deviation is a better measure of the
absolute dispersion than the range and the quartile deviation. The mean deviation is
based on all the observations, a property which is not possessed by the range and
the quartile deviation.

Coefficient of the Mean Deviation

A relative measure of dispersion based on the mean deviation is called the
coefficient of the mean deviation or the coefficient of dispersion. It is defined as the
ratio of the mean deviation of the average used in the calculation of the mean
deviation.
Example
Calculate the mean deviation from the (1) arithmetic mean (2) median (3) mode in
respect to the marks obtained by nine students given below and show that the mean
deviation from the median is the minimum.

Marks (out of 25): 7, 4, 10, 9, 15, 12, 7, 9, 7

After arranging the observations in ascending order, we get

Marks: 4, 7, 7, 7, 9, 9, 10, 12, and 15

From the above calculations, it is clear that the mean deviation from the median has
the least value.
 Standard Deviation

The standard deviation is defined as the positive square root of the mean of the
square deviations taken from the arithmetic mean of the data.

For the sample data the standard deviation is denoted by S and is defined as:

For frequency distribution the formula becomes:

The standard deviation is in the same units as the units of the original observations.
If the original observations are in grams, the value of the standard deviation will also
be in grams.

The standard deviation plays a dominant role in the study of variations in data. It is a
very widely used measure of dispersion. It is based on all the observations and is
subject to mathematical treatment.

Example
Calculate the standard deviation for the following sample data using all methods: 2,
4, 8, 6, 10, and 12.
Merits
1. It is rigidly defined.
2. It is based on all the observations of the series and hence it is representative.
3. It is amenable to further algebraic treatment.
4. It is least affected by fluctuations of sampling.

Demerits
1. It is more affected by extreme items.
2. It cannot be exactly calculated for a distribution with open-ended classes.
3. It is relatively difficult to calculate and understand.

Variance

Variance is another absolute measure of dispersion. It is defined as the average of

the squared difference between each of the observations in a set of data and the
mean.
Example

Calculate the variance for the following sample data: 2, 4, 8, 6, 10, and 12.

Coefficient of Variation

A coefficient of variation (CV) is a statistical measure of the dispersion of data points

in a data series around the mean. The coefficient of variation represents the ratio of
the standard deviation to the mean, and it is a useful statistic for comparing the
degree of variation from one data series to another, even if the means are drastically
different from one another. It is usually expressed in percentage and is referred as
percent Coefficient of Variation
Where S = Standard Deviation and X́ = Mean

In the investing world, the coefficient of variation allows you to determine how much
volatility, or risk, you are assuming in comparison to the amount of return you can
expect from your investment. In simple language, the lower the, ratio of standard
deviation to mean, the better your risk-return trade-off.

Coefficient of Standard Deviation

The standard deviation is the absolute measure of dispersion. Its relative measure is
called the standard coefficient of dispersion or coefficient of standard deviation. It is
defined as:

Example
Calculate the coefficient of standard deviation and coefficient of variation for the
following sample data: 2, 4, 8, 6, 10, and 12.