STATISTICAL METHODS FOR MANAGERIAL DECISIONS

(SMMD) 2019-20
TERM 1
PROFESSOR VISHNUPRASAD NAGADEVARA

Session Topics1 Readings2

Module 1: Descriptive Statistics (Single Variable) - Revision

Random Variables, Probability Distributions, Normal Model
1 Case: How reliable is Reliable? Ch. 9, Ch. 12
Case: How much to pack?
Module 2: Inferential Statistics (Single Variable)
2 Sampling Variation, Central Limit Theorem
Ch. 13, 14.1
Exercise

Confidence Intervals (I): Population Mean

3 Ch. 15
Case: Is Medworld Cheating?

Confidence Intervals (II): Population Proportion

4 Sample Size Determination Ch. 15
Case: Is Medworld Cheating?

Hypothesis Tests (I): Single-tailed Tests

5 Ch. 16
Case: Bending of Belmadi

Hypothesis Tests (II): Two-tailed Tests

6 Ch. 16
Case: How much to Pack?

Module 3: Descriptive Statistics (Two Variables)

Linear Fit: Method and Interpretation Ch. 19
7 Module 4: Inferential Statistics (Two Variables)
Simple Linear Regression (I): Model, Inference Ch. 21
Case: Alcoholic Beverages: Chapter 6 – Step back to forward

Ch. 20, Ch.

8 Simple Linear Regression (II): Assumptions, Diagnostics, Prediction
21, Ch. 22

Module 5: Inferential Statistics (Multiple Variables)

Multiple Regression (I): Interpretation, Goodness of fit, Assumptions, Inference
9 Multiple Regression (II): Categorical Predictor Variables Ch. 23
Case: United Technologies of India Ch. 25
Case: The gender divide

Multiple Regression (III): Model Selection, Omitted Variables Bias,

10 Ch. 24
Multicollinearity

1 A more detailed session-wise outline is included at the end of the syllabus.

2
Chapter numbers refer to Statistics for Business by Stine and Foster, 2nd Edition.

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 STATISTICAL METHODS FOR MANAGERIAL DECISIONS
Instructor: Prof. Vishnuprasad Nagadevara
Office: 4125
Email: Nagadevara_V@isb.edu
Office Hours: TBA

Course Description
Managerial decisions need to be grounded in a firm understanding of the business facts. Statistics is the
study of how to collect data that make sense and how to make sense out of the collected data. This course
has two parts. The first part includes basic descriptive statistics, sampling and inference. The second part
covers the widely used statistical techniques such as regression analysis. Students are expected to solve
simple numerical problems by hand, analyze small data sets using a statistical software package, and
interpret and effectively communicate the results. Applications from various functional areas of business
will be discussed.

Course Material
Software
JMP Statistical Discovery Software from SAS will be the primary statistical tool used for the course. Several
books are available in the library and the Academic Associates for your section can help you get started on
this software. In addition, we may also use Microsoft Excel to do some of the basic analysis.

Required text
Statistics for Business: Decision Making and Analysis (SFB), 2nd Edition, by Robert A. Stine and Dean Foster,
published by Pearson Education Inc., © 2014.

We will closely follow this textbook in class. A few copies are available in the library but it is strongly
recommended that you purchase a personal copy.

Class Handouts
Class slides will be typically distributed during or after the class session. They will also be posted on the
learning management system after the class.

Online Course Management

I will make extensive use of the LMS as the primary channel to share class material and to communicate
with you. Please check the class website and the announcement board regularly for any postings.

Problem sets
Exercises for most sessions will be posted on LMS. You are strongly recommended to attempt these
exercises after each session. Solutions for these problem sets will be posted on LMS after the corresponding
session in class.

Grading Scheme and Honor Code

Quizzes (4) 20% 4N
Assignments 15% 2N-b
Midterm 30% 4N
Final 35% 4N

Two quizzes each will be conducted before and after the midterm. The homework assignments will provide
you with the practice for using the software and applying the concepts discussed in class. They will be
synchronized with class discussions and will likely require weekly submissions. Grades for all assignments
and quizzes will be released on LMS within 3-4 days. More details on the structure of the assignments and
grade allocation will be provided in class.

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Course conduct
Attendance & Punctuality
The course is designed to be a combination of lectures and interactive activities. Course concepts
introduced in earlier classes will be used to build as building blocks for later classes. As a result, missing
classes will seriously compromise learning. We will follow attendance policy that is in accordance with the
student handbook as below (absence allowed only for extraordinary circumstances such as extreme personal
illness, injury, or close family bereavement).

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.
The ISB expects students to attend all class sessions in every module. However, if due to completely
unavoidable reasons a student is forced to miss a class session. The school policy is below:

1. If a student misses three sessions in any course, s/he will obtain a letter grade lower than that awarded
by the faculty for that course.

2. With four sessions missed, the student will receive a letter grade that is two levels lower

3. If a student misses 5 sessions or more, the student will receive an ‘F’ grade for that course.
However, the faculty may decide on more different attendance requirements for their individual class,
and this will be communicated to you by the faculty through their course outline

Classroom etiquette
In addition to being present in every class, students need to be in their seats (not merely in the room or at
the door) before the class begins; late arrivals disrupt the learning environment. Similarly, students should
not go in and out of the classroom during the class. Please plan other activities keeping in mind the class
schedule. Students may not engage in side conversations, even if they pertain to the course content.
Students should switch off their cell phone, laptop, tablet etc. before they enter the class. Putting gadgets
on silent mode is not sufficient.

Honor Code
Honor code is an embodiment of the values of integrity, honesty and fair play that the ISB community
feels proud to uphold and adhere to. For practically minded, it is a simple and sensible way to ensure that
some students do not have an unfair advantage over others. Please refer to the table about grading
scheme and honor code above. Further, refer the document on honor code available on the atrium for
more details. The golden thumb rule, however, is do not use someone else's work in an unfair manner
and represent it as your own. In case you have any doubt whether certain actions of yours will or will not
violate the honor code, coming up to talk to me is a great idea!

Office Hours
Office hours will be on Mondays through Thursdays from 5 pm to 6 pm in my office, unless otherwise
announced in the class. Students are advised to come prepared to the office hours with specific questions
and use them effectively to clarify doubts. While not necessary, I would appreciate a prior intimation if
you plan to come for office hours with a brief description of your question. It will not be possible to
accommodate appointments by request outside these hours. Students are also encouraged to use email for
questions that do not require personal meetings.

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Key Learning Goals
Develop critical and integrative thinking
Frame unstructured business problems in appropriate statistical terms in order leverage data analytics and
make better decisions.

Effective communication
Communicate the results of the analysis clearly in the context of the problem without excessive use of the
statistical jargon.

Ethical responsibility
Unambiguously articulate the conclusions and limitations of the analysis with a clear separation between
data and judgment.

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Session 1: Descriptive Statistics and Probability Distributions [Ch. 9, 12]
Objectives: (i) Motivate the use of statistical methods for managerial decision making
(ii) Reinforce the concept of normal distribution and its various properties
Session 2: Sampling Distributions and the Central Limit Theorem [Ch. 13, 14.1]
Objectives: (i) Introduce the concept of statistical inference
(ii) Recognize the existence of sample-to-sample variations
(iii) Understand central limit theorem and its implications for statistical inference
Sessions 3 & 4: Confidence Intervals [Ch. 15]
Objectives: (i) Introduce the concept of confidence intervals as a method of making statistical inference
(ii) Calculate confidence intervals for population mean with known and unknown population
standard deviations
(iii) Calculate confidence intervals for population proportions
(iv) Quantify minimum sample sizes to achieve certain margin of error in predictions
Session 5 & 6: Hypothesis Tests [Ch. 16]
Objectives: (i) State null and alternative hypotheses and define Type-I and Type-II errors
(ii) Conduct single-tailed hypothesis tests for population mean
(iii) Calculate the p-value for a given evidence and P (Type-I error)
(iv) Apply the hypothesis testing framework to population proportion and two-sided tests
Session 7 (A): Least Squares Fit (OLS) [Ch. 19]
Objectives: (i) Understand the ordinary least squares (OLS) method of estimating a linear relationship
(ii) Learn how to interpret the estimated coefficients of the fitted line
(iii) Evaluate the goodness of fit – RMSE and R2
Sessions 7(B) & 8: Simple Linear Regression (SLR) [Ch. 21, 20, 22]
Objectives: (i) Introduce key assumptions underlying the SLR model
(ii) Conduct hypothesis tests for coefficient estimates
(iii) Use the results of the SLR model for prediction purposes
(iv) Use the residuals of OLS fit to diagnose potential violations of SLR assumptions
Session 9 (A): Multiple Regression [Ch. 23]
Objectives: (i) Extend the regression framework to multiple explanatory variables (predictors)
(ii) Test for significance of individual variables and the overall model
Session 9 (B): Multiple Regression with Categorical Predictors [Ch. 25]
Objectives: (i) Modeling categorical predictors through dummy variables
(ii) Interpretation of the coefficients of dummy variables
Session 10: Model Selection in Multiple Regression [Ch. 24]
Objectives: (i) Introduce the issue of (multi)collinearity and its impact on estimation
(ii) Introduce the concept of omitted variable bias

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