Learning League Enrol on WhatsApp
Home › Revision Notes › PRC-2 QAB
ICAP PRC-2 · QUANTITATIVE ANALYSIS FOR BUSINESS · CHAPTER 8

Statistical Measures of Data

Key Definitions · Core Concept · Key Rules & Principles · Formula Zone — Central Tendency · Formula Zone — · Step-by-step Methods · Different Cases / Scenarios

Premium Exam Revision · Prepared by Haleema Lateef · Learning League
1

Chapter Overview

🧭

Your visual roadmap through the chapter

Measures of Central Tendency

Mean, median, mode, geometric & harmonic mean

Measures of Dispersion

Range, IQR, variance, standard deviation, coefficient of variation

Measures Compared

Choosing the right average and dispersion measure; skewness; box plots

Statistical measures that summarize data's central value (averages) and its spread or variability (dispersion), supporting descriptive and predictive analysis.

Comparing datasets fairly requires knowing not just their typical value but also how consistent or spread out they are.

Calculate mean/median/mode for grouped and ungrouped data; compute variance, SD and coefficient of variation; construct and read box plots and ogives.

2

Key Definitions

📘

Source-based terminology, exam-ready

Descriptive Statistics

The part of statistics that describes or summarizes information from data, e.g. via central value or dispersion.

Key word: describe/summarize

Arithmetic Mean

The sum of the values in a series divided by the count of values — a mathematical representation of the typical value.

Key word: sum ÷ count

Median

The middle value when data is arranged in ascending or descending order.

Key word: middle value

Mode

The most frequently occurring value (or the highest frequency in grouped data). There may be more than one mode, or none at all.

Key word: most frequent

Geometric Mean

Useful when several quantities are multiplied together to arrive at a product, e.g. average growth rate over several years.

Key word: average growth rate

Harmonic Mean

The number of observations divided by the sum of the reciprocals of each value; useful for average speeds.

Key word: average speed

Variance & Standard Deviation

Variance is the average of the squared deviations from the mean. Standard deviation is its square root.

Key word: SD = √variance

Coefficient of Variation

A relative measure of dispersion expressing standard deviation as a percentage of the mean, used to compare variability between datasets.

Key word: relative spread

3

Core Concept

🎯

Explained in exam-oriented language

CONCEPT → Central Tendency

MEANING

A single value that represents the "centre" or typical value of a dataset.

PURPOSE

Compare two or more datasets using the same units.

APPLICATION

Choosing mean, median, mode, geometric or harmonic mean depending on the data's nature.

CONCEPT → Dispersion

MEANING

How spread out or clustered the data is around its central value.

PURPOSE

Reveal consistency that measures of central tendency alone cannot show (e.g. two batsmen with the same average).

APPLICATION

Absolute measures (range, IQR, variance, SD) vs relative measures (coefficient of variation).

4

Key Rules & Principles

📏

Every source rule, exam-ready

RULE 1 Properties of an ideal average

Well defined; based on all values; capable of further algebraic calculation

Not affected by extreme values; stable in repeated sampling

RULE 3 Properties of variance & standard deviation

SD and variance of a constant value are always zero

Independent of a change of origin: SD(x±C)=SD(x)

Affected by a change of scale: SD(Cx)=|C|×SD(x); Var(Cx)=C²×Var(x)

If symmetrical: 68.27% of values lie within ±1 SD, 95.45% within ±2 SD, 99.73% within ±3 SD of the mean

RULE 2 Properties of the arithmetic mean

Sum of deviations from the mean is always zero; sum of squared deviations is always least

Combining group means requires the weighted combined-mean formula, NOT a simple average of the means

Mean of constant values is that constant; mean is affected by a change of origin or scale (Mean(x±c)=Mean(x)±c; Mean(cx)=c×Mean(x))

RULE 4 Empirical relationship & skewness

(Mean − Mode) = 3 × (Mean − Median)

Perfectly symmetric: mean = median

Skewed left/negative: mean < median | Skewed right/positive: mean > median

5

Formula Zone — Central Tendency

🧮

Every formula supported by the source text

MEDIAN (UNGROUPED) & MEAN

Position = (n+1)÷2 | Mean(x̄) = Σx÷n or Σfx÷Σf

Mean formula on the right applies to grouped data using class mid-points (x).

MEDIAN (GROUPED)

Median = L + [(Σf÷2 − cf)÷f] × h

L=lower boundary of median class, cf=cumulative frequency before it, f=its frequency, h=its width.

MODE (GROUPED)

Mode = L + [(fm−f1)÷((fm−f1)+(fm−f2))] × h

fm=frequency of modal class, f1=class before, f2=class after.

COMBINED MEAN & WEIGHTED MEAN

Combined = (MeanAnA+MeanBnB)÷(nA+nB) | Weighted =

Σwx÷Σw

Never average two group means directly — weight by each group's size (n) or importance (w).

GEOMETRIC MEAN

G.M. = ⁿ√(x1×x2×...xn) or ⁿ√(end value÷start value)

Use (1+growth rate) as each x for compounding growth rates over n periods.

HARMONIC MEAN

H.M. = n ÷ Σ(1÷x)

Number of items divided by the sum of the reciprocals of each value. Useful for average speed/rate problems.

5

Formula Zone —

🧮

DISPERSION Every formula supported by the source text

RANGE & INTER-QUARTILE RANGE

Range = max−min | IQR = Q3−Q1 | Semi-IQR = (Q3−Q1)÷2

For grouped data, range = upper limit of last class − lower limit of first class.

VARIANCE & STANDARD DEVIATION

s2 = Σ(x−x̄)2÷n or Σfx2÷Σf − (Σfx÷Σf)2 | s=√s2

Second variance formula (grouped) avoids computing each deviation individually.

COEFFICIENT OF VARIATION

CV = (s ÷ x̄) × 100

Lower CV = greater precision/consistency. Used to compare datasets with different units or scales.

PEARSON'S COEFFICIENT OF SKEWNESS

Sk = 3(Mean−Median) ÷ Standard Deviation

Sk=0: symmetric. Positive Sk: right-skewed. Negative Sk: left-skewed.

6

Calculation Roadmap

🗺️

General path for any statistical measure question

1· Read Question

Grouped or ungrouped? What measure is needed?

2· Organize Data

Sort, tabulate class/frequency/mid-point

3· Select Formula

Match the measure and data type

4· Substitute

Put known values into the formula

5· Calculate & Check

Solve, recheck, state final answer

7

Step-by-step Methods

🪜

Kept separate — do not mix methods

METHOD A · Median (Grouped Data)

  1. 1Build the cumulative frequency column; find Σf÷2
  2. 2Identify the median class (where the cf first reaches/exceeds Σf÷2)
  3. 3Note L, cf (before median class), f and h for that class
  4. 4Substitute into Median=L+[(Σf/2−cf)/f]×h

METHOD D · Geometric Mean

  1. 1Express each period's growth as (1+rate), or note start/end values
  2. 2Multiply all growth factors together (or divide end value by start value)
  3. 3Take the n-th root, where n=number of periods
  4. 4Subtract 1 and convert to a percentage for the average growth rate

METHOD B · Mode (Grouped Data)

  1. 1Identify the modal class (highest frequency)
  2. 2Note L, fm (modal class), f1 (class before), f2 (class after), and h
  3. 3Substitute into Mode=L+[(fm−f1)/((fm−f1)+(fm−f2))]×h
  4. 4Alternative: draw the histogram and read off where the two diagonal lines cross

METHOD E · Variance & Standard Deviation

  1. 1Ungrouped: find x̄, then each (x−x̄) and square it
  2. 2Sum the squared deviations and divide by n for variance
  3. 3Grouped: use Σfx²/Σf − (Σfx/Σf)² instead
  4. 4Take the square root of variance for standard deviation

METHOD C · Mean (Grouped / Weighted / Combined)

  1. 1Grouped: find each class mid-point (x), multiply by frequency (f)
  2. 2Sum fx and f, then divide (Σfx÷Σf)
  3. 3Weighted: multiply each value by its weight, sum, divide by Σw
  4. 4Combined: use each group's mean AND size in the combined-mean formula

METHOD F · Coefficient of Variation & Skewness

  1. 1Calculate the mean and SD for each dataset being compared
  2. 2CV = (SD÷mean)×100 for each; lower CV = more consistent
  3. 3Skewness: find mean, median and SD
  4. 4Substitute into Sk=3(Mean−Median)/SD; interpret the sign
8

Different Cases / Scenarios

🔀

Recognise the situation, pick the right measure

IF you want the most commonly-used, calculation-friendly average

→ USE the arithmetic mean

IF the distribution is skewed / has extreme values

→ USE the median (not affected by extremes)

IF you want the single most frequently occurring value

→ USE the mode

IF averaging growth/decline rates or ratios over time

→ USE the geometric mean

IF averaging a rate like speed (distance per constant time)

→ USE the harmonic mean

IF some values matter more than others

→ USE the weighted mean

IF combining the means of two different-sized groups

→ USE the combined mean formula — never just average the two means

IF comparing variability between datasets with different units/scales

→ USE the coefficient of variation (relative), not raw SD

9

Comparison Tables

⚖️

Don't confuse these!

A.M.G.M.H.M.MedianMode
Uses all values?YesYesYesMiddle value onlyHighest-frequency value only
Effect of extremesGreatest effectLess than A.M.Least effectNo effectNo effect
Zero/negative valueCan calculateCannotCannotCan calculateCan calculate
Typical usageDefault choiceGrowth/decline ratesRates like speedSkewed/asymmetric dataMost frequent value needed
MeasureAdvantageDisadvantage
MeanUses every value; used extensively elsewhereDistorted by extreme values in small samples
MedianNot influenced by extreme values; an actual value (odd n)Little use in other statistical applications
ModeIs an actual valueLittle use in other applications
RangeEasy to calculate and understandDistorted by extreme figures
Semi-IQREasy to calculate; ignores extremesDoesn't use all figures; no insight into clustering
Standard DeviationUses all values; useful in further applicationsHarder to understand/calculate by hand
10

Reading Ogives & Box Plots

📌

How to interpret the source's graphical tools

Reading an ogive for median/quartiles

The median is the value at Σf÷2 on the cumulative-frequency axis; Q1 and Q3 are read at Σf×25% and Σf×75% respectively, tracing across to the curve then down to the value.

Reading a box-and-whisker plot

The box spans Q1 to Q3 (the middle 50%); the line inside is the median. Whiskers extend from the box to the minimum and maximum values in the data.

11

Worked Calculation Logic

✍️

Method students must reproduce in the exam

GIVEN → FORMULA → SUBSTITUTION → CALCULATION → ANSWER

Group A: 1,200 students, mean score 60. Group B: 400 students, mean score 70. Find the combined mean.

GIVEN: MeanA=60, nA=1,200; MeanB=70, nB=400

FORMULA: Combined Mean = (MeanAnA+MeanBnB)÷(nA+nB)

SUBSTITUTION: = (60×1,200 + 70×400) ÷ (1,200+400) = (72,000+28,000)÷1,600

FINAL ANSWER: Combined mean = 100,000÷1,600 = 62.5 (NOT the simple average of 65)

12

Exam Question Patterns

📝

Direct calculation — mean/median/mode, grouped or ungrouped

Geometric/harmonic mean — growth rates or average speed

Combined/weighted mean — merging groups correctly

Dispersion calculation — range, IQR, variance, SD, CV

Comparison — which dataset is more consistent (CV)

Graph/box-plot reading and skewness identification

13

Exam Traps

⚠️

⚠ WATCH OUT

  • ✗ Averaging two group means directly — always use the combined-mean formula weighted by group size.
  • ✗ Variance vs SD mix-up — forgetting to take the square root of variance to get SD.
  • ✗ Using arithmetic mean for growth rates instead of the geometric mean.
  • ✗ Wrong median class — picking the class where cf first reaches, not exceeds, Σf/2 incorrectly.
  • ✗ Misreading CV direction — a LOWER coefficient of variation means MORE consistency, not less.
14

Quick Decision Tree

🌳
QUESTION GIVEN
↓
Central value, or spread/variability?
↓
Central →
↓
mean/median/mode/G.M./H.M.
↓
Spread →
↓
range/IQR/variance/SD/CV
↓
CALCULATE → CHECK → FINAL ANSWER
⚡

Chapter 8 in 60 Seconds

⚡

Median pos: (n+1)/2

Mean: Σx/n or Σfx/Σf

Mode: L+[(fm−f1)/((fm−f1)+(fm−f2))]×h

G.M.: ⁿ√(x1×x2...xn)

H.M.: n/Σ(1/x)

Variance: Σ(x−x̄)²/n; SD=√variance CV = (SD/mean)×100

Trap: combined mean ≠ simple average

Test yourself on this chapter

Practice 100 MCQs per chapter with answers – Chapter 1 is free for everyone. Enrol on WhatsApp for all 12 chapters, classes and tests on our student portal.

All PRC-2 QAB revision notes
  1. Linear and Quadratic Equations
  2. Coordinate System and Its Application
  3. Mathematical Progression
  4. Linear Programming
  5. Financial Mathematics
  6. Discounted Cash Flows
  7. Data – Collection and Representation
  8. Statistical Measures of Data
  9. Indices
  10. Correlation and Regression
  11. Probability Concepts
  12. Probability Distributions