STANDARD DEVIATION MOST RELIABLE MEASURE OF DISPERSION

SYNOPSIS
Measure

of Dispersion

Types

Range Quartile deviation Mean deviation Standard deviation

MEASURE OF DISPERSION

A measure of dispersion may be defined as a statistics signifying the extent of the scatteredness of items around a measure of central tendency. A measure of dispersion may be expressed in an absolute form, or in a relative form. Absolute measures are expressed in concrete units i.e., units in terms of which the data have been expressed e.g.: Rupees, Centimeters, Kilogram etc. and are used to describe frequency distribution. The relative measures are expressed in ratios or percentage and they are suitable for comparative studies.

TYPES

The Range The Quartile Deviation (QD) The Mean Deviation (MD) The Standard Deviation (SD)

RANGE

Range represents the differences between the values of the extremes. The values in between two extremes are not all taken into consideration. The range is an simple indicator of the variability of a set of observations. It is denoted by R. Range can be computed using following equation Range = Large value Small value Coefficient of Range = Large value Small value Large value + Small value

Merits It is very simplest to measure. It is defined rigidly It is very much useful in Statistical Quality Control (SBC). It is useful in studying variation in price of shars and stocks. Demerits It is not stable measure of dispersion affected by extreme values. It does not considers class intervals and is not suitable for C.I. problems. It considers only extreme values.

QUARTILE DEVIATION

Quartile divides the total frequency in to four equal parts. The lower quartile Q1 refers to the values of variants corresponding to the cumulative frequency N/4. The upper quartile Q3 refers to the value of variants corresponding to the cumulative frequency N. Quartile deviation is defined as QD = 1/2(Q3-Q1). In this quartile Q2 as it corresponds to the value of variant with cumulative frequency is equal to c.f. = N/2. Relative measure of dispersion coefficient of QD= (Q3Q1)/(Q3+Q1)

Merits It is very easy to compute It is not affected by extreme values of variable. It is not at all affected by open and class intervals. Demerits It ignores completely the portions below the lower quartile and above the upper of quartile. It is not capable for further mathematical treatment. It is greatly affected by fluctuations in the sampling. It is only the positional average but not mathematical average.

MEAN DEVIATION

Mean deviation is the average differences among the items in a series from the mean itself or median or mode of that series. It is concerned with the extent of which the values are dispersed about the mean or median or the mode. It is found by averaging all the deviations from control tendency. These deviations are taken into computations with regard to negative sign. If xi is variant and takes the values x1, x2, x3, .. xn with average A (mean, median, mode), then mean deviation from the average A is defined by MD= |xi-A|/N Coefficient of MD = MD/Mean

Merits It is rigidly defined and easy to compute. It takes all items in to considerations and gives weight to deviation according to these sign. It is less affected by extreme values. It removes all irregularities by obtaining deviation and provides correct measures. Demerits It is not suitable for algebraic treatments. It is positive which is not justified mathematically. It is not satisfactory measure when the deviations are taken from mode. It is not suitable when class intervals are open end.

STANDARD DEVIATION

Standard deviation is the root of sum of the squares of deviations divided by their numbers. It is also called Mean error deviation(or) mean square error deviation (or) Root mean square deviation. It is a second moment of dispersion. Since the sum of squares of deviations from the mean is a minimum, the deviations are taken only from the mean (But not from median and mode). The standard deviation is Root Mean Square (RMS) average of all the deviations from the mean. It is denoted by sigma .

CHARACTERISTICS

Standard deviation and coefficient of variation possesses all the properties which a good measure of dispersion should possess. The process of squaring the deviation eliminates negative sign and makes mathematical computations easy.

SD is the square root of sum of squared deviation from the mean divided by the number of observations

The quantity ^2 is called variance. Coefficient of variance It is defined as the ratio to be equal to standard deviation divided by mean. The percentage form of CV is given by CV = (/ mean)x 100

Merits It is based on all observations. It can be smoothly handled algebraically. It is a well defined and definite measure of dispersion. It is of great importance when we are making comparison between variability of two series. Demerits It is difficult to calculate and understand. It gives more weightage to extreme values as the deviation is squared. It is not useful in economic studies.

The reason why SD is a very useful measure of dispersion is that, if the observations are from a normal distribution, then 68% of observations lie between mean 1 SD ,95% of observations lie between mean 2 SD and 99.7% of observations lie between mean 3 SD Along with mean, it can be used to detect skewness. While looking at the earlier measures of dispersion all of them suffer from one or the other demerit i.e. Range suffer from a serious drawback considers only 2 values and neglects all the other values of the series. Quartile deviation considers only 50% of the item and ignores the other 50% of items in the series. Mean deviation no doubt an improved measure but ignores negative signs without any basis.

While calculating SD we take deviations of individual observations from their AM and then each squares. The sum of the squares is divided by the number of observations. The square root of this sum is knows as standard deviation.