1

Definition
Measures of dispersion are descriptive
statistics that describe how similar a set of
scores are to each other
The more similar the scores are to each other, the
lower the measure of dispersion will be
The less similar the scores are to each other, the
higher the measure of dispersion will be
In general, the more spread out a distribution is,
the larger the measure of dispersion will be
2
Measures of Dispersion
Which of the
distributions of scores
has the larger
dispersion?
0
25
50
75
100
125
1 2 3 4 5 6 7 8 9 10
0
25
50
75
100
125
1 2 3 4 5 6 7 8 9 10
The upper distribution
has more dispersion
because the scores
are more spread out
That is, they are less similar to
each other
3
Measures of Dispersion
There are three main measures of dispersion:
The range
The semi-interquartile range (SIR)
Variance / standard deviation
4
The Range
The range is defined as the difference
between the largest score in the set of data
and the smallest score in the set of data, X
L
-
X
S

What is the range of the following data:
4 8 1 6 6 2 9 3 6 9
The largest score (X
L
) is 9; the smallest score
(X
S
) is 1; the range is X
L
- X
S
= 9 - 1 = 8
5
When To Use the Range
The range is used when
you have ordinal data or
you are presenting your results to people with
little or no knowledge of statistics
The range is rarely used in scientific work as it
is fairly insensitive
It depends on only two scores in the set of data, X
L

and X
S

Two very different sets of data can have the same
range:
1 1 1 1 9 vs 1 3 5 7 9
6
The Semi-Interquartile Range
The semi-interquartile range (or SIR) is defined
as the difference of the first and third
quartiles divided by two
The first quartile is the 25
th
percentile
The third quartile is the 75
th
percentile
SIR = (Q
3
- Q
1
) / 2
7
SIR Example
What is the SIR for the
data to the right?
25 % of the scores are
below 5
5 is the first quartile
25 % of the scores are
above 25
25 is the third quartile
SIR = (Q
3
- Q
1
) / 2 = (25 -
5) / 2 = 10
2
4
6
5 = 25
th
%tile
8
10
12
14
20
30
25 = 75
th
%tile
60
8
When To Use the SIR
The SIR is often used with skewed data as it is
insensitive to the extreme scores
Standard Deviation
Standard Deviation: A measure of the spread of
the scores around the mean.
Average distance from the mean.
Example: Can you calculate the average distance of
each score from the mean? (X=4)
7, 6, 3, 3, 1 (distance from the mean: 3,2,-1,-1,-3)
3, 4, 4, 5, 4, (distance from the mean: -1,0,0,1,0)

Formula for Standard Deviation


s = (X
i
-X)
2

n-1

Standard deviation
of the sample
Sigma: sum of what follows
Each individual score
Mean of all the scores
Sample size
Why n-1?
s (lower case sigma) is an estimate of the population
standard deviation ( :sigma) .

In order to calculate an unbiased estimate of the
population standard deviation, subtract one from
the denominator.

Sample standard deviation tends to be an
underestimation of the population standard
deviation.


Variance
Variance: Standard deviation squared.
S = (X-X)
2

n-1

Not likely to see the variance mentioned by
itself in a report.
Difficult to interpret.
But it is important since it is used in many
statistical formulas and techniques.
X (x-x) (x-x)
2

110 -222.55 49530.98
117 -215.55 46464.2
129 -203.55 41434.86
300 -32.55 1059.864
357 24.44 597.5309
100 -232.55 54082.09
500 167.44 28037.64
630 297.44 88473.2
750 417.44 174259.9
483940.2
SD concept in Finance
Standard deviation is a standard measure of
investment risk. It is a historical statistic
measuring volatility and the dispersion of a set of
data from the mean.
Standard deviation is a measure of the volatility,
or how far away from the mean the outcomes
will be.
A small-cap stock will typically have a high
standard deviation compared to a stable blue
chip dividend stock. The small-cap stock may
have a higher expected rate of return but that is
to compensate the owner for a greater amount of
risk.
There are two routes for a worker to reach his office. Both
the routes involve hold ups due to traffic lights. He records
the time it takes over a series of six journeys for each route.
The results are shown in the table.
Route 1 15 15 11 17 14 12
Route 2 11 14 17 15 16 11
Using your answers to Route 1 and Route 2 suggest which
route you would recommend. State your reason clearly.
Grouped Data
X f fx (X-X ) (X-X)
2
f(X-X)
2

Coefficient of Variation
The SD is an absolute measure of dispersion that expresses
variation in the same unit as the original data.
The SD cannot be sole basis for comparing two distributions.
If we have SD of 10 and mean of 5 the value is twice as large as
mean itself.
But if we have SD of 10 and mean of 5000 the variation relative
to mean is insignificant.
The CV is relative measure of dispersion.
IT relates SD and mean by expressing SD as percentage of mean.
The unit of measurement is percentage .

CV (P)=(SD/)*100

Technician A completes on an average 40
analysis with a SD of 5.
Technician B completes on an average 160
analysis with a SD of 15.