763

Acceptance intervals, 240242

Addition rule of probabilities, 9293
Adjusted coeffcient of determina-
tion R
2
, 472
Allocation
proportional, 697
of sample effort among strata,
703705
Alternative hypothesis, 327, 331,
336339, 356, 386, 388. See also
Hypothesis tests/testing
Analysis of variance (ANOVA)
comparison of several population
means, 625627
introduction to, 625
Kruskal-Wallis test and, 638640
one-way, 627636
for regression, 412413
two-way, more than one
observation per cell, 650656
two-way, one observation per cell,
randomized blocks, 641647
Analysis of variance tables,
two-way, 646647
Approximate mean, 6162
ARIMA (autoregressive integrated
moving average) models,
693694
Arithmetic mean, 40
Association test, 595598
Asymmetric distribution, 4243
Autocorrelated errors
Durbin-Watson test and, 564566
estimation of regressions with,
566570
explanation of, 562564
with lagged dependent variable,
570571
Autocorrelation, 688689
Autoregressive integrated moving
average (ARIMA) models,
693694
Autoregressive models
estimation and, 689
example of, 689690
explanation of, 688
frst-order, 688
forecasting from, 689692
second-order, 688
Bar charts, 810, 3233
Basic outcomes, 75
Bayes, Thomas, 112
Bayes theorem, 112119
alternative statement, 115
examples, 112117
explanation of, 112
management decision making, 118
solution steps for, 114
Bernoulli distribution, 139141
Bernoulli random variable, 140
Beta coeffcients, 436438
Beta measure, of fnancial risk,
436438
Between-groups mean square
(MSG), 662663
Between-groups variability, 629
Bias
explanation of, 267
specifcation, 551553
Biased estimators, 267
Binomial distribution, 139145
compared with normal
distribution, 201
compared with Poisson
distribution, 152
derived mean and variance of,
140, 175176
examples of, 142145
explanation of, 142
normal distribution
approximation for, 199204
Poisson approximation to,
151152
probability function table, 720723
Binomial probabilities, cumulative,
724728
Bivariate probabilities, 102112
Blocking variables, 539540, 641
Block means, 651
Box-and-whisker plots, 4951
Categorical data analysis
contingency tables and, 594598
goodness-of-ft tests, population
parameters unknown,
589593
goodness-of-ft tests, specifed
probabilities, 583588
INDEX
nonparametric tests for
independent random samples,
608612, 616619
nonparametric tests for paired or
matched samples, 599606
Spearman rank correlation and,
614615
Categorical variables, 5
graphs to describe, 815
Cell means, 651652
Central limit theorem, 234240
from linear sum of random
variables, 260
Central tendency, measures of,
3948
Chebychevs theorem, 5557
Chi-square distribution, 286288
lower critical values table, 749
population variance, 251252
upper critical values table, 748
variance of normal distribution,
355
Chi-square random variable, 585
for contingency tables, 595
Chi-square test
examples of, 586588
of variance of a normal
distribution, 355356
Classical probability, 8182, 85
Cluster bar charts, 10, 3233
Cluster sampling
estimators for, 709712
explanation of, 709
Cobb-Douglas production function,
499
Coeffcient estimation,
533534
Coeffcient estimators
derivation of, 533534
least squares, 407410, 419
variance, 417, 485486
Coeffcient of determination R
2
adjusted, 472
explanation of, 413417
regression models and, 472
sum of squares decomposition
and, 469470
Coeffcient of multiple correlation,
472
764 Index
Coeffcient of multiple regression,
461467
Coeffcient of standard errors, 475
Coeffcient of variation (CV), 55
Collectively exhaustive events, 78
Combinations
formula for determining number
of, 8485
number of, 8283
Complement rule, 9192, 9899
Complements, 7880
Component bar charts, 10
Composite hypothesis, 331, 336339
Computer applications. See also Excel
for jointly distributed discrete
random variables, 160
of regression coeffcient, 409410
Conditional coeffcients, 466
Conditional mean, 160
Conditional probability, 9394
Conditional probability
distribution, 158
Conditional variance, 160
Confdence interval estimator, 271
Confdence intervals
based on normal distribution, 273
for difference between two normal
population means, dependent
samples, 309312
for difference between two normal
population means,
independent samples, 313319
for difference between two popu-
lation proportions, 320321
examples of, 274, 280282, 284285,
288, 290293
explanation of, 273
fnite populations, 289293
forecast, and prediction intervals,
427428
for mean of normal distribution,
population variance known,
271276
for mean of normal distribution,
population variance un-
known, 277282
for population mean, 271282,
289292
for population proportion, 283285,
292293
for population regression slope,
420421
for population total, 289292
for predictions, 427428
reducing margin of error of,
275276
for regression coeffcients,
418425, 475
sample size determination, large
populations, 320321
Students t distribution, 277282
of two means, dependent samples,
309
of two means, unknown
population variances that are
assumed to be equal, 315317
of two means, unknown popula-
tion variances that are not
assumed to be equal, 317319
for variance of normal
distribution, 286289
Confdence level, 272
Consistent estimators, 306
Contingency tables, 32. See also
cross tables
chi-square random variable for,
595
explanation of, 594595
test of association in, 595598
Continuous numerical variables, 6
Continuous random variables,
127128, 177185
covariance of, 209 (See also Jointly
distributed continuous
random variables)
expectations for, 183185
jointly distributed, 208216
probability density functions and,
179181
uniform distribution, 181
Control charts, 241242
Control intervals, 241242
Correlation
applications of, 432
coeffcient of determination R
2

and, 416
coeffcient of multiple correlation,
472
hypothesis test for, 432433
of random variables, 162, 209
zero population, 433434
Correlation analysis, 432434
Correlation coeffcient analysis,
6768
Correlation coeffcients, 6468
defned, 64
example using, 6568
of random variables, 162163, 209
scatter plots and, 65
Spearman rank, 614615
statistical independence and, 164
Counterfactual argument, 331
Covariance (Cov), 64, 161162
computing using Excel, 67
continuous random variables, 209
statistical independence, 164
Critical value, 333
Cross-sectional data, 15
Cross tables, 910
Cumulative binomial probabilities,
724728
Cumulative distribution function,
178179, 182
of normal distribution, 188
Cumulative line graphs, 24
Cumulative probability function,
130131
Cyclical component, of time series,
665
Data
cross-sectional, 15
interval, 6
measurement levels, 67
nominal, 6
ordinal, 6
presentation errors, 3135
qualitative, 6
quantitative, 6
ratio, 7
time-series, 1519
Data fles descriptions, 450451,
528530
Davies, O. L., 538
Decision making
sampling and, 23
in uncertain environment, 25
Decision rules, guidelines for
choosing, 362363
Degrees of freedom, 253, 420
Dependent samples, 309312,
367370
Dependent variables, 27
lagged, as regressors, 547550
Descriptive statistics, 5
Differences, of random variables,
164, 210
Discrete numerical variables, 56
Discrete random variables, 127
expected value of, 132133
expected value of functions, 135
jointly distributed, 156168
probability distributions for,
128131
joint probability functions of, 158
properties of, 132137
standard deviation of, 133135
variance of, 133135, 174
Index 765
Distribution shape, 4243. See also
specifc distributions
Diversifable risk, 436438
Dummy variables, 502506, 534545
experimental design models,
538543
public sector applications,
543545
for regression models, 502506,
538545
Durbin-Watson test, 564566
cut-off points, 757758
Effcient estimators, 268
Empirical rule, 5657
Equality, 383385
of variances between two
normally distributed
populations, 383385
Errors, 3134, 475, 557561
data presentation, 3135
nonsampling, 45
reducing margin of, 275276
sampling, 4, 273, 329
standard error, estimate, 470
Type I, 330, 331, 387
Type II, 330, 331, 349353, 387
Error sum of squares, 407408,
412413, 469, 632
Error variance, estimation of, 470
Estimated regression model, 404
Estimates, 265
confdence interval, 271
explanation of, 265
point, 266
standard error, 470
Estimation. See also Confdence
intervals
of beta coeffcients, 436438
coeffcient, 533534
of error variance, 470
least squares, 449450, 463
of model error variance, 417
of multiple regression coeffcients,
461467
of population proportion, 293
of regressions with autocorrelated
errors, 566570
Estimators, 265
biased, 267
confdence interval, 271
consistent, 306
effcient, 268
examples of, 268
explanation of, 265
least squares, 449450
least squares coeffcient, 407410,
419
least squares derivation of,
526527
point, 265269
of population mean, 705
unbiased, 266267, 269
Events, 7681
collectively exhaustive, 78
complements, 7880
independent, 105106
intersection of, 7680, 124125
mutually exclusive, 7677, 97
union, 7780, 124125
Excel, 67. See also Minitab
confdence intervals using,
281282, 311312
covariance and correlation using,
163
jointly distributed discrete
random variables, 160
regression analysis using, 409
shape of a distribution, 42
Expected value
of continuous random variables,
183185
of discrete random variables,
132133
of functions of random variables,
135, 161, 164
of sample mean, 230
Experimental design models,
538543
Exploratory data analysis (EDA), 26
Exponential distribution,
205207
Exponential model transformations,
498500
Exponential smoothing, 677687
Extreme points, 439, 441, 444
Failure to reject, 330, 331
F distribution, 383, 751754
Financial investment portfolios,
212216
Financial risk, beta measure of,
436438
Finite population correction factor,
231, 289
Finite populations, confdence inter-
val estimation for, 289293
First-order autoregressive models,
688689
First quartile, 4445
Fisher, R. A., 538
Five-number summary, 45
Forecasting
from autoregressive models,
689692
regression models and,
426430
seasonal time series, 684687
simple exponential smoothing
and, 677687
trends and, 666
F probability distribution
hypothesis test for popula-
tion slope coeffcient using,
423425
Frequency distributions, 8, 20
class width, 21
construction of, 21
cumulative, 22
inclusive and nonoverlapping
classes, 2122
interval width, 21
number of classes for, 21
for numerical data, 2023
relative, 8, 22
F tests
for simple regression coeffcient,
424425
t tests vs., 488489
Functions, of random variables,
135137
Geometric mean, 4344
Geometric mean rate of return, 43
Goodness-of-ft tests
explanations of, 583
population parameters unknown,
589593
specifed probabilities, 583588
Gosset, William Sealy, 277, 306
Graphical analysis, 438444
Graphs
for categorical variables, 815
data presentation errors, 3134
to describe relationships between
variables, 2729
distribution shape, 2426
histograms, 24
of multiple regression model,
460
for numerical variables, 2030
ogives, 24
scatter plots, 2729
stem-and-leaf displays, 2627
for time-series data, 1520
Grouped data, measures of,
6162
Group means, 651
766 Index
Heteroscedasticity
explanation of, 557559
graphical techniques for detecting,
558559
test for, 559560
Histograms, 24
misleading, 3133
Holt-Winters exponential
smoothing forecasting
model, 680687
example of, 681683
nonseasonal series, 681683
seasonal series, 684687
Hypergeometric distribution, 153155
Hypothesis
alternative, 331, 332, 336339, 356
composite, 331, 336339
null, 327331, 356
one-sided composite alternative,
331
simple, 331
two-sided composite alternative,
331, 340341
Hypothesis test decisions, 331
Hypothesis tests/testing, 326327
assessing power of, 348353
comments on, 386388
concepts of, 327331
confdence intervals, 418425
control chart, 388
for correlation, 432434
for difference between two normal
population means, dependent
samples, 367370
for difference between two
normal population means,
independent samples, 371378
for difference between two popu-
lation proportions, 379382
of equality of variances between
two normally distributed
populations, 383385
fow chart for selecting, 393394
introduction to, 332333
for mean of a normal distribution,
population variance known,
332341, 349353
for mean of normal distribution,
population variance
unknown, 342344
for one-way analysis of variance,
631633
of population proportion, 346347
for population slope coeffcient
using F distribution, 423425
power of, 331
for regression coeffcients,
477482, 485489
for regression models, 418425
for two-way analysis of variance,
646647
for variance of a normal distribu-
tion, 355357
for zero population correlation,
433434
Income distribution, 43
Independent events, 97, 105106
Independent random samples, non-
parametric tests for, 608612
Independent samples, 313319,
371378
Independent variables, 27
jointly distributed, 158
Indicator variables, 502506. See also
Dummy variables
Inference
about population regression, 475
model interpretation and, 534
Inferential statistics, 5
Integral calculus, 222223
Interaction, as source of variability,
650
Intercept, 399
Interquartile range (IQR), 49
Intersection of events, 7677, 7980,
131
Interval data, 6
Intervals
acceptance, 240242
control, 241242
for frequency distribution, 24
Interval scales, 6
Investment portfolios
beta measure of fnancial risk,
436438
portfolio analysis, 212216
returns on, 214216
Irregular component of time series,
665
moving averages to smooth,
669671
Jarque-Bera test for normality,
591593
Joint cumulative distribution
function, 208209
Jointly distributed continuous
random variables, 156168,
208216. See also Continuous
random variables; Random
variables
examples of, 210211
fnancial investment portfolios,
212216
linear combinations of, 212
Jointly distributed discrete random
variables, 156167. See also
Discrete random variables;
Random variables
computer applications, 160
conditional mean and variance,
160
correlation, 162163
covariance, 162
examples of, 156157, 159160, 163
expected value of functions of, 161
independence of, 158
portfolio analysis, 165167
Joint probability, 76, 9495, 97,
103105
Joint probability distribution,
157158
Joint probability function, 157
properties of, 158
Knowledge, 5
Kruskal-Wallis test, 638640
Kurtosis, 591, 593
Lagged dependent variable,
547550
autocorrelation errors in models
with, 570571
Law of large numbers, 234
Least squares algorithm, 494495
Least squares coeffcient estimators,
407410, 419
Least squares derivation of
estimators, 526527
Least squares derived coeffcient
estimators, 408409
Least squares estimation, sample
multiple regression and, 463
Least squares estimators, derivation
of, 449450
Least squares procedure, 407408,
462467
Least squares regression, 399400
Least squares regression line, 399,
426
Leverage, 439
Linear combinations, of random
variables, 212
Linear functions, of random
variables, 160161, 185
Linear models, 398400
Linear regression equation, 411417
Index 767
analysis of variance and, 413
coeffcient of determination R
2
,
413414
Linear regression model, 401406
assumptions, 402403
examples using, 405406
outcomes, 404
population, 403
Linear regression population
equation model, 403
Linear relationships, 398399
Linear sum of random variables, 260
Line charts, 1519
Logarithmic transformations,
497498
Lower confdence limit, 273
Lower tail test, 600
Mann-Whitney U statistic, 608609
Mann-Whitney U test, 608610
Marginal distributions, 209
Marginal probabilities, 103105,
159160
Marginal probability distribution,
157158
Margin of error, 273, 279, 284
reducing, 275276
Matched pairs, 367368
Mathematical derivations, 526528,
662663
Matrix plots, 466467
Mean, 4044
approximate, 6162
of Bernoulli random variable, 140
of binomial distribution, 142,
175176
conditional, 160
of continuous random variables,
184
geometric, 4344
of jointly distributed random
variables, 176
of linear functions of a random
variable, 135137, 174175
measures of variability from,
4858
of normal distribution, popula-
tion variance known, 295296,
332341, 349351
of normal distribution, population
variance unknown, 342344
of Poisson probability
distribution, 148
of sampling distribution of sample
variances, 263
weighted, 6063
Mean square regression (MSR), 485,
486
Mean squares
between-groups, 631
within-groups, 631
Measurement levels, 67
Measures of central tendency, 3948
geometric mean, 4344
mean, median, mode, 4042
shape of a distribution, 4243
Median, 4042, 43
Minimum variance unbiased
estimator, 268
Minitab, 67. See also Excel
autoregressive models, 689692
confdence intervals using, 317,
318319, 321
descriptive measures using, 67
Durbin-Watson test, 566
exponential model estimation, 499
hypothesis testing, 357, 369370,
376
lagged dependent variable, 549
matrix plots, 466467
Monte Carlo sampling
simulations, 260263
for probability distributions, 134,
144145
regression analysis using, 409410
Missing values, 7, 310311
Mode, 4042
Model error variance, estimation of,
417
Model specifcation, 509511,
532533
Monte Carlo sampling simulations,
234240, 260263
Minitab, 260263
Most effcient estimator, 267269
Moving averages
explanation of, 669671
extraction of seasonal component
through, 672677
simple centered (2m + 1)-point, 671
Multicollinearity, 554557
corrections for, 556557
indicators for, 555
Multiple comparisons, 634635
Multiple regression. See also
Regression
analysis application procedure
and, 509517
applications of, 455456
confdence intervals and hypoth-
esis tests for individual regres-
sion coeffcients, 473482
estimation of coeffcients and,
461467
explanatory power of multiple
regression equation and,
468472
introduction to, 454
least squares procedure, 462467
objectives, 456
prediction and, 491493
tests on regression coeffcients,
485489
Multiple regression equation,
468472
Multiple regression model, 454
assumptions, 462
development of, 457460, 511512
dummy variables for, 502506
explanation of, 454460
model specifcation, 454456
objectives, 456457
population, 459
residuals analysis and, 514517
test on all coeffcients of, 477
three-dimensional graphing of,
460
transformations for nonlinear,
494500
Multiplication rule of probabilities,
9496
Mutually exclusive events, 7677,
97
Nominal data, 6
Nondiversifable risk, 436
Nonlinear regression models
logarithmic transformations,
497498
quadratic transformations,
495497
transformations for, 494500
Nonparametic tests
for independent random samples,
608612
Kruskal-Wallis test, 638640
Mann-Whitney U test, 608610
normal approximation to the sign
test, 603604
for paired or matched samples,
599606
for randomness, 616619
sign test, 599601, 606
Spearman rank correlation,
614615
Wilcoxon rank sum test, 611612
Wilcoxon signed rank test,
602606
768 Index
Nonprobabilistic sampling
methods, 714
Nonsampling errors, 45
Nonuniform variance, 557558
Normal approximation
Mann-Whitney U test, 609
to sign test, 603604
to Wilcoxon signed rank test,
604606
Normal distribution, 186197
to approximate binomial
distribution, 199204
compared with binomial
distribution, 201
confdence interval estimation for
variance of, 286289
confdence interval for mean of,
271276
cumulative distribution function
of, 188
examples of, 191194
explanation of, 186187
probability density function for,
187
properties of, 187
standard, 189190
test for, 591593
tests of mean of, population
variance known, 332341
tests of the variance of, 355357
Normality, test for, 591
Normal probability plots, 195197
Normal random variables, range
probabilities for, 189
Null hypothesis, 327331, 356. See
also Hypothesis
p-value, 340341, 356
rejection of, 386387
sign test, 599601
specifying, 386387
testing regression coeffcients, 477
tests/testing goodness-of-ft tests,
583588
Number of combinations, 82
formula for determining, 82
Numerical variables, 56
graphs to describe, 2030
Odds, 106
Ogives, 22
One-sided composite alternative
hypothesis, 327, 331
One-way analysis of variance,
627636
framework for, 628
hypothesis test for, 631633
multiple comparisons between
subgroup means, 634635
population model for, 635636
sum of squares decomposition for,
630631
One-way analysis of variance ta-
bles, 632633
Ordering, 83
Ordinal data, 6
Outcomes
basic, 75
for bivariate events, 102
random experiments and, 75
Outliers, 27, 42, 441
effect of, 442444
Overall mean, 652, 705706
Overinvolvement ratios,
106109
Paired samples, Wilcoxon signed
rank test for, 602603
Parameters, 4, 40
Pareto, Vilfredo, 12
Pareto diagrams, 1214
Pearsons product-moment
correlation coeffcient,
6466
Percent explained variability, 415
Percentile, 4447
Permutations, 8284
Pie charts, 1112
Point estimates, 266
Point estimators, properties of,
265269
Poisson, Simeon, 147
Poisson approximation to binomial
distribution, 151152
Poisson probability distribution,
147152
approximation to binomial
distribution, 151152
assumptions of, 147
comparison to binomial
distribution, 152
cumulative, table of, 739747
examples of, 148152
explanation of, 147
functions, mean, and variance, 148
individual, table of, 730738
test for, 589591
Pooled sample variance, 316
Population
defned, 3
sampling errors, 4
sampling from, 225229
Population covariance, 64
Population mean
allocation overall, 704
comparison of several, 625627
confdence interval estimation
of difference between two,
309319
confdence interval for, 289291
estimation of, 698699, 710
guidelines for choosing decision
rule for, 362
tests of difference between,
dependent samples, 367370
tests of difference between,
independent samples, 371378
Population model
linear regression, 403
for one-way analysis of variance,
635636
Population multiple regression
model, 459
Population proportions
confdence interval estimation for,
283285, 292293
estimation of, 293, 320321, 701703,
710
guidelines for choosing decision
rule for, 363
optimal allocation, 704
sample size for, 297299
tests of, 346347, 351353
tests of difference between,
379382
Population regression parameters,
475
Population regression slope
basis for inference about, 420
confdence interval, 420423
tests of, 422
Populations, examples of, 225
Population slope coeffcient,
hypothesis test for, 423425
Population total
confdence interval for, 289291
estimation of, stratifed random
sample, 700701
Population variance, 5152
chi-square distribution of,
251252
confdence intervals and, 273274,
315319
independent samples and,
313319
tests of difference with known,
371373
tests of difference with unknown,
373376
Index 769
tests of mean of normal
distribution with known,
313314, 332341, 349353
tests of mean of normal
distribution with unknown,
315319, 342344, 376378
tests of normal distribution,
355357
Portfolio analysis, 166168, 212216
Portfolio market value, 165167
Power, 330331
Power function, 350351
Prediction
multiple regression and, 491493
regression models and, 426430
Prediction intervals, 427428
Predictor variables, bias from
excluding signifcant, 551553
Price-earnings ratios, 269
Probability, 7374
addition rule of, 9293
Bayes theorem, 112118
bivariate, 102112
classical, 8182
complement rule, 9192, 9899
conditional, 9394
examples, 8586
joint, 9495, 97, 103105
marginal, 103105, 159160
multiplication rule of, 9496
for normally distributed random
variables, 192
overinvolvement ratios and, 106109
permutations and combinations,
8285
random experiments and, 7475
of range using cumulative
distribution function, 179
relative frequency, 86
rules, 91102
statistical independence and,
9699
subjective, 8790
Probability density functions,
179180, 232
areas under, 180181
for chi-square distribution, 252
for exponential distribution, 206
for normal distribution, 187
properties of, 179180
for sample means, 232
for sample proportions, 247
of standard normal and Students
t distribution, 278
Probability distribution function,
129, 179
Probability distributions
Bernoulli distribution, 139141
binomial distribution, 139145
chi-square distribution, 251252
for discrete random variables,
128131
exponential distribution, 205207
hypergeometric distribution,
153155
Poisson probability distribution,
147152
Students t distribution, 306307
uniform, 181
Probability functions
binomial distribution table,
720723
conditional, 158
joint probability function, 157, 158
marginal probability function, 157
Probability plots, normal, 195197,
515
Probability postulates
consequences of, 8889
explanation of, 8788
Probability value (p-value), 340341
Problem defnition, 5
Properties
of cumulative probability
distributions, 131
of joint probability functions, 158
of probability distribution
functions, 130
Proportional allocation, 703
Proportion random variable,
203204
Proportions, confdence interval
estimation for, 283285
Public sector research, 543
Public sector research and policy
analysis, dummy variable
regression in, 543545
p-value, 334339
for chi-square test for variance,
356
for sign test, 600
Quadratic transformations, 495497
Qualitative data, 6
Quantitative data, 6
Quartiles, 4445
Queuing problems, 149151
Quota sampling, 714
Random experiments, 74
outcomes of, 7480
Randomized block design, 641642
Random samples/sampling, 3
independent, 313319
nonparametric tests for
independent, 608612
simple, 3, 225226
Random variables, 127128
continuous (See Continuous
random variables)
correlation of, 209
differences between, 164
differences between pairs of, 210
linear combinations of, 212
linear functions of, 160161, 185
linear sums and differences of, 164
mean and variance of linear
functions of, 135137
proportion, 203204
statistical independence and, 161,
164
sums of, 209210
Range
explanation of, 49
interquartile, 49
Ratio data, 7
Ratio of mean squares, 663
Ratios
overinvolvement, 106109
price-earnings, 269
Regression. See also Least squares
regression; Multiple
regression; Simple regression
analysis of variance and, 412413
autocorrelated errors and, 562571
dummy variables and experimen-
tal design, 534545
heteroscedasticity, 557561
lagged valued of dependent
variable, 547550
least squares regression, 399400
linear regression model and,
401406
mean square, 470, 486
multicollinearity, 554557
specifcation bias, 551553
Regression coeffcients
computer computation of, 409410
confdence intervals for, 475477
hypothesis tests for, 473475
subsets of, tests on, 486487
tests on, 485487
Regression models. See also Multiple
regression model; Nonlinear
regression models
coeffcient estimation, 533534
dummy variables, 502506,
534538
770 Index
Regression models (continued)
interpretation and inference, 534
linear, 398406, 411417
methodology for building, 532534
specifcation, 532533
verifcation, 534
Regression sum of squares, 412,
413, 470
Reject, 331
Relative effciency, 268
Relative frequency distribution,
8, 22
Relative frequency probability, 86
Reliability factor, 273
Repeated measurements, 309,
311312
Residuals, analysis of, 514517
Returns, on fnancial portfolios,
214216
Risk, 213
diversifable, 436438
nondiversifable, 436
Runs test, 616619
Sample covariance, 64
Sample means
acceptance intervals, 240242
central limit theorem, 234240
expected value of, 230
explanation of, 229
sampling distributions of, 229242
standard normal distribution for,
231233
Sample proportions
examples of, 247248
explanation of, 245
sampling distributions of, 245248
Sample sizes
determining, 320321
determining, for stratifed random
sampling, 705706
fnite populations, 299302
large populations, 295299
Sample space, 75
Samples/sampling. See also Random
samples/sampling
cluster, 709712
defned, 3
dependent, 309312, 366370
explanation of, 25
independent, 313319, 366370
Monte Carlo sampling
simulations, 260263
nonprobabilistic methods, 714
from population, 225229
simple random, 3, 225226
stratifed, 696706
systematic, 3
two-phase, 712714
Sample standard deviation, 251
Sample variances, 53
chi-square distribution, 251252
explanation of, 251
sampling distributions of,
250255, 263
Sampling distributions
explanation of, 226229
of least squares coeffcient
estimator, 419
of sample means, 229242
of sample proportions, 245248
of sample variances, 250255, 263
Sampling error, 45, 273, 329
Sampling without replacement,
153154
Sampling with replacement, 154
Sarbanes-Oxley Act (SOX), 597598
Scatter plot analysis, 439444
Scatter plots, 2729
for residuals analysis, 515517
Seasonal component
extraction of, through moving
averages, 672677
of time series, 666667
Seasonal index method, 684687
Seasonal time series, forecasting,
684687
Second-order autoregressive
models, 688
Second quartile, 44
Side-by-side bar chart, 10
Signifcance level, 329, 331
Sign test
explanation of, 599
normal approximation to, 603606
for paired or matched samples,
599603
p-value for, 600
for single population median, 606
Simple exponential smoothing
explanation of, 678
forecasting through, 678680
Holt-Winters model and, 680683
Simple hypothesis, 327, 331
Simple random samples/sampling,
3, 225
beta measure of fnancial risk,
436438
correlation analysis and, 432434
explanatory power of lin-
ear regression equation and,
411417
graphical analysis and, 438444
least squares coeffcient estimators
and, 407410
prediction and, 426430
sample sizes, 300302
statistical inference and, 418425
Simple regression. See Regression
Simple regression coeffcient, F test
for, 424425
Skewed distribution, 2526
Skewness, 25, 7172, 591, 593
Slope, 399
differences in, 505
Spearman rank correlation, 614615
cutoff points, 756
Specifcation bias, 551553
SSE, 407408, 412413
SSR, 413415
SST, 413415
Stacked bar charts, 10
Standard deviation, 5253, 54
of continuous random variables, 184
of discrete random variable, 133
sample, 251
Standard error of the estimate, 470
Standardized normal random
variable, 231
Standardized residual, 441444
Standard normal distribution, 189
cumulative distribution function
table, 718
for sample means, 231233
Statistical independence, 9699,
161, 164
covariance, 164
Statistical inference, 418425
Statistical signifcance, 387
Statistical thinking, 2
Statistics, 2, 40. See also
Nonparametic tests
defned, 4
descriptive, 5
inferential, 5
Stem-and-leaf displays, 2627
Stock market crash of 2008, 74
beta coeffcients limitations, 437
cautions concerning fnancial
models, 216
Stratifed random sampling
allocation of sample effort among
strata and, 703705
analysis of results from, 698700
determining sample sizes for,
705706
estimation of population mean,
698699
Index 771
Time-series data
explanation of, 664665
graphs to describe, 1520
Time-series plots, 1519
misleading, 3334
Time-series regression model,
567570
Total explained variability,
527528
Total sum of squares, 413,
469, 662
Treatment variables, 539540
Tree diagrams, 103104
Trend component, of time series,
665666
t tests vs. F tests, 488489
Two-phase sampling, 712714
Two-sided composite alternative
hypothesis, 327, 331, 340341
Two-tail test, 600
Two-way analysis of variance
examples of, 655656
hypothesis tests for, 646
more than one observation per
cell, 650656
one observation per cell,
641647
several observations per cell,
650656
sum of squares decomposition
for, 645
table format, 646647
tables, 646647
Two-way analysis of variance
tables, 646647
Type I errors, 329331, 333, 387
Type II errors, 329331,
349350, 387
determining probability of,
349353
Unbiased estimator, 266267
Uncertainty, decision making
under, 25
Uniform distribution, 181, 184
Uniform probability distribution,
178
Unions, 7780, 131
Upper confdence limit, 273
Variability
between-groups, 629
interaction as source of, 650
total explained, 527528
within-groups, 629
Variability, measures of, 4859
Variables. See also Continuous
random variables
bias from excluding signifcant
predictor, 551553
blocking, 539, 641
categorical, 5, 814
classifcation of, 58
correlation analysis and,
432434
defned, 5
dependent, 27
dummy, 502506, 534545
effect of dropping statistically
signifcant, 512514
independent, 27
indicator, 502506
lagged dependent, 547550
of linear functions of a random
variable, 168
measures of relationships
between, 6469
numerical, 56, 2029
relationships between, 398399
tables and graphs to describe
relationships between,
2729
treatment, 539
Variance, 5154. See also Analysis of
variance (ANOVA)
of Bernoulli random variable,
140
of binomial distribution, 142,
175176
conditional, 160
of continuous random variables,
184
of discrete random variables,
133135, 164, 174
for grouped data, 6162
of jointly distributed random
variables, 176
of linear functions of a random
variable, 135137, 174175
nonuniform, 557558
of normal distribution, conf-
dence interval estimation for,
286289
of normal distribution, tests for,
355357
of Poisson probability
distribution, 148
sampling distributions of sample,
250255
between two normally distributed
populations, tests of equality,
383385
estimation of population
proportion, 701703
estimation of population total,
700701
examples of, 699700
explanation of, 696697
Students t distribution, 306307
confdence intervals and,
277282
hypothesis tests, 342344
for two means with unknown
population variances not
assumed to be equal, 324
upper critical values table, 750
Subgroup means, multiple
comparisons between, 634
Subjective probability, 8790
Sum of squares, 413, 469, 629
Sum of squares decomposition
coeffcient of determination and,
469470
one-way analysis of variance,
630631
two-way analysis of variance,
645
Sums, of random variables, 164,
209210
Survey responses
missing values in, 310311
sampling errors, 4
Symmetric distributions, 25
Systematic sampling, 3
Tables
for categorical variables, 89
cross tables, 910
to describe relationships between
variables, 2729
frequency distribution, 89
Test of association, 595598
Tests. See Hypothesis tests/testing
Third quartile, 4445
Time plots, autocorrelation and,
562563
Time series
autoregressive integrated moving
average models, 693694
autoregressive models, 688692
components of, 665669
explanation of, 664665
exponential smoothing and,
677687
forecasting seasonal, 684687
moving averages, 669677
Time-series component analysis,
668
772 Index
Waiting line problems, 149151
Weighted mean, 6063
Width, 273
Wilcoxon rank sum statistic T, 611
Wilcoxon rank sum test, 611612
cutoff points for statistic, 755
Wilcoxon signed rank test,
602603
normal approximation to, 604606
Within-groups mean square (MSW),
662
Within-groups variability, 629
y-intercept, 399
Zero population correlation,
433434
z-score, 5758
Variation, coeffcient of, 55
Venn diagrams
for addition rule, 92
for complement of event, 78
for intersection of events, 77, 80,
124125
for union of events, 7678,
124125
Verifcations, 174176
Standard Normal
Distribution Table
z 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879
0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319
1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767
2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857
2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936
2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
2.7 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974
2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986
3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990
3.1 0.4990 0.4991 0.4991 0.4991 0.4992 0.4992 0.4992 0.4992 0.4993 0.4993
3.2 0.4993 0.4993 0.4994 0.4994 0.4994 0.4994 0.4994 0.4995 0.4995 0.4995
3.3 0.4995 0.4995 0.4995 0.4996 0.4996 0.4996 0.4996 0.4996 0.4996 0.4997
Dr. William L. Carlson, prepared using Minitab 16.
0 z = 1.25
z
0.3944
Upper critical values of Students t Distribution with N Degrees of Freedom
t
0
,
For selected probabilities, a, the table shows the values t
n,a
such that P1t
n
7 t
n,a
2 = a, where t
n
is a Students t random variable with n degrees
of freedom. For example, the probability is .10 that a Students t random variable with 10 degrees of freedom exceeds 1.372.
Probability of Exceeding the Critical Value
n 0.10 0.05 0.025 0.01 0.005 0.001
1 3.078 6.314 12.706 31.821 63.657 318.313
2 1.886 2.920 4.303 6.965 9.925 22.327
3 1.638 2.353 3.182 4.541 5.841 10.215
4 1.533 2.132 2.776 3.747 4.604 7.173
5 1.476 2.015 2.571 3.365 4.032 5.893
6 1.440 1.943 2.447 3.143 3.707 5.208
7 1.415 1.895 2.365 2.998 3.499 4.782
8 1.397 1.860 2.306 2.896 3.355 4.499
9 1.383 1.833 2.262 2.821 3.250 4.296
10 1.372 1.812 2.228 2.764 3.169 4.143
11 1.363 1.796 2.201 2.718 3.106 4.024
12 1.356 1.782 2.179 2.681 3.055 3.929
13 1.350 1.771 2.160 2.650 3.012 3.852
14 1.345 1.761 2.145 2.624 2.977 3.787
15 1.341 1.753 2.131 2.602 2.947 3.733
16 1.337 1.746 2.120 2.583 2.921 3.686
17 1.333 1.740 2.110 2.567 2.898 3.646
18 1.330 1.734 2.101 2.552 2.878 3.610
19 1.328 1.729 2.093 2.539 2.861 3.579
20 1.325 1.725 2.086 2.528 2.845 3.552
21 1.323 1.721 2.080 2.518 2.831 3.527
22 1.321 1.717 2.074 2.508 2.819 3.505
23 1.319 1.714 2.069 2.500 2.807 3.485
24 1.318 1.711 2.064 2.492 2.797 3.467
25 1.316 1.708 2.060 2.485 2.787 3.450
26 1.315 1.706 2.056 2.479 2.779 3.435
27 1.314 1.703 2.052 2.473 2.771 3.421
28 1.313 1.701 2.048 2.467 2.763 3.408
29 1.311 1.699 2.045 2.462 2.756 3.396
30 1.310 1.697 2.042 2.457 2.750 3.385
40 1.303 1.684 2.021 2.423 2.704 3.307
60 1.296 1.671 2.000 2.390 2.660 3.232
100 1.290 1.660 1.984 2.364 2.626 3.174
` 1.282 1.645 1.960 2.326 2.576 3.090
NIST/SEMATECH e-Handbook of Statistical Methods, http://www.itl.nist.gov/div898/handbook/, September 2011.