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000 0137010591 FM.qxd11-11-201412:50Page iEven You Can LearnStatistics and AnalyticsThird EditionAn Easy to Understand Guide toStatistics and AnalyticsDavid M. Levine, Ph.D.David F. Stephan

000 0137010591 FM.qxd11-11-201412:50Page iiEditor-in-Chief: Amy NeidlingerOperations Specialist: Jodi KemperCover Designer: Alan ClementsManaging Editor: Kristy HartSenior Project Editor: Betsy GratnerCopy Editor: Krista HansingProofreader: Sarah KearnsInterior Designer: ArgosyCompositor: codeMantraManufacturing Buyer: Dan Uhrig 2015 by Pearson Education, Inc.Upper Saddle River, New Jersey 07458For information about buying this title in bulk quantities, or for special salesopportunities (which may include electronic versions; custom cover designs;and content particular to your business, training goals, marketing focus, orbranding interests), please contact our corporate sales department atcorpsales@pearsoned.com or (800) 382-3419.For government sales inquiries, please contactgovernmentsales@pearsoned.com.For questions about sales outside the U.S., please contactinternational@pearsoned.com.Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners.All rights reserved. No part of this book may be reproduced, in any form orby any means, without permission in writing from the publisher.Printed in the United States of AmericaFirst Printing December 2014ISBN-10: 0-13-338266-4ISBN-13: 978-0-13-338266-2Pearson Education LTD.Pearson Education Australia PTY, Limited.Pearson Education Singapore, Pte. Ltd.Pearson Education North Asia, Ltd.Pearson Education Canada, Ltd.Pearson Educación de Mexico, S.A. de C.V.Pearson Education—JapanPearson Education Malaysia, Pte. Ltd.Library of Congress Control Number: 2014949421

000 0137010591 FM.qxd11-11-201412:50Page iiiTo our wivesMarilyn and MaryTo our childrenSharyn and MarkAnd to our parentsIn loving memory, Lee, Reuben, Ruth, and Francis

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000 0137010591 FM.qxd11-11-201412:50Page vTABLE OF CONTENTSTable of ContentsAcknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viiiAbout the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ixIntroductionChapter 1The Even You Can Learn Statisticsand Analytics Owners Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiFundamentals of Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 The First Three Words of Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 The Fourth and Fifth Words . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3 The Branches of Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.4 Sources of Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 Sampling Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.6 Sample Selection Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Chapter 2Presenting Data in Tables and Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152.1 Presenting Categorical Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152.2 Presenting Numerical Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222.3 “Bad” Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Chapter 3Descriptive Statistics.373.1 Measures of Central Tendency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373.2 Measures of Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413.3 Measures of Variation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453.4 Shape of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Chapter 4Probability.674.1 Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674.2 More Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684.3 Some Rules of Probability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704.4 Assigning Probabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Chapter 5Probability Distributions.795.1 Probability Distributions for Discrete Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795.2 The Binomial and Poisson Probability Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855.3 Continuous Probability Distributions and the Normal Distribution . . . . . . . . . . . 925.4 The Normal Probability Plot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100v

000 0137010591 FM.qxdvi11-11-201412:50Page viTABLE OF CONTENTSChapter 6Sampling Distributions and Confidence Intervals . . . . . . . . . . . . . . 1136.1 Foundational Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1136.2 Sampling Error and Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1176.3 Confidence Interval Estimate for the Mean Using the t Distribution(σ Unknown) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1206.4 Confidence Interval Estimation for Categorical Variables. . . . . . . . . . . . . . . . . . . . . . . . 1236.5 Bootstrapping Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126Chapter 7Fundamentals of Hypothesis Testing.1377.1 The Null and Alternative Hypotheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1377.2 Hypothesis Testing Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1397.3 Decision-Making Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1417.4 Performing Hypothesis Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1437.5 Types of Hypothesis Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144Chapter 8Hypothesis Testing: Z and t Tests.1498.1 Testing for the Difference Between Two Proportions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1498.2 Testing for the Difference Between the Means ofTwo Independent Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1568.3 The Paired t Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162Chapter 9Hypothesis Testing: Chi-Square Tests and the One-WayAnalysis of Variance (ANOVA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1759.1 Chi-Square Test for Two-Way Cross-Classification Tables . . . . . . . . . . . . . . . . . . . . . . . 1759.2 One-Way Analysis of Variance (ANOVA): Testing for theDifferences Among the Means of More Than Two Groups . . . . . . . . . . . . . . . . . . . . . . 182Chapter 10Simple Linear Regression.20310.1 Basics of Regression Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20310.2 Developing a Simple Linear Regression Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20610.3 Measures of Variation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21510.4 Inferences About the Slope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22010.5 Common Mistakes Using Regression Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223Chapter 11Multiple Regression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23911.1 The Multiple Regression Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23911.2 Coefficient of Multiple Determination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24211.3 The Overall F Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24311.4 Residual Analysis for the Multiple Regression Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 24411.5 Inferences Concerning the Population Regression Coefficients . . . . . . . . . . . . . . 245Chapter 12Fundamentals of Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25712.1 Basic Vocabulary of Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25712.2 Software for Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

000 0137010591 FM.qxd11-11-201412:50Page viiTABLE OF CONTENTSChapter 13Descriptive Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26513.1 Dashboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26513.2 Common Descriptive Analytics Visualizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268Chapter 14Predictive Analytics.27714.1 Analysis with Predictive Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27714.2 Classification and Regression Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27814.3 Cluster Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28314.4 Multidimensional Scaling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286Appendix AMicrosoft Excel Operation and Configuration . . . . . . . . . . . . . . . . . 293A.S1 Spreadsheet Operation Conventions .293A.S2 Spreadsheet Technical Configurations.294Appendix BReview of Arithmetic and Algebra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295Assessment Quiz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295Symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298Answers to Quiz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304Appendix CStatistical Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305Appendix DSpreadsheet Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333CT: Chart Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333FT: Function Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335Appendix EAdvanced Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337ADV: Advanced How-Tos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337ATT: Analysis ToolPak Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342Appendix FDocumentation for Downloadable Files . . . . . . . . . . . . . . . . . . . . . . . . . . . 345F.1 Downloadable Data Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345F.2 Downloadable Spreadsheet Solution Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357vii

000 0137010591 FM.qxdviii11-11-201412:50Page viiiACKNOWLEDGMENTSAcknowledgmentsWe would especially like to thank the staff at Financial Times/Pearson: AmyNeidlinger for making this book a reality, Sarah Kearns for her proofreading,Krista Hansing for her copy editing, and Betsy Gratner for her work in theproduction of this text.We have sought to make the contents of this book as clear, accurate, anderror-free as possible. We invite you to make suggestions or ask questionsabout the content if you think we have fallen short of our goals in any way.Please email your comments to davidlevine@davidlevinestatistics.com andinclude “Even You Can Learn Statistics and Analytics 3/e” in the subject line.

000 0137010591 FM.qxd11-11-201412:50Page ixABOUT THE AUTHORSAbout the AuthorsDavid M. Levine is Professor Emeritus of Statistics and ComputerInformation Systems at Baruch College-CUNY. He received B.B.A. and M.B.A.degrees in Statistics from City College of New York and a Ph.D. degree fromNew York University in Industrial Engineering and Operations Research. Heis nationally recognized as a leading innovator in business statistics education and is the coauthor of such best-selling statistics textbooks as Statisticsfor Managers Using Microsoft Excel, Basic Business Statistics: Concepts andApplications, Business Statistics: A First Course, and Applied Statistics forEngineers and Scientists Using Microsoft Excel and Minitab.He also is the author of Statistics for Six Sigma Green Belts and Champions,published by Financial Times–Prentice-Hall. He is coauthor of Six Sigma forGreen Belts and Champions and Design for Six Sigma for Green Belts andChampions also published by Financial Times–Prentice-Hall, and QualityManagement Third Ed., McGraw-Hill-Irwin. He is also the author of VideoReview of Statistics and Video Review of Probability, both published by VideoAided Instruction. He has published articles in various journals includingPsychometrika, The American Statistician, Communications in Statistics,Multivariate Behavioral Research, Journal of Systems Management, QualityProgress, and The American Anthropologist and has given numerous talks atAmerican Statistical Association, Decision Sciences Institute, and MakingStatistics More Effective in Schools of Business conferences. While at BaruchCollege, Dr. Levine received numerous awards for outstanding teaching.David F. Stephan is an independent instructional technologist. During hismore than 20 years teaching at Baruch College-CUNY, he pioneered the useof computer-equipped classrooms and interdisciplinary multimedia tools,was an associate director of a U.S. Department of Education FIPSE projectthat applied interactive media to support instruction and devised techniquesfor teaching computer applications in a business context. A frequent participant in the Decision Sciences Institute’s Making Statistics for More Effectivein School of Business mini-conferences, he is also a coauthor of BusinessStatistics: A First Course and Statistics for Managers Using Microsoft Excel. Heis also the developer of PHStat, the statistics add-in for Microsoft Excel distributed by Pearson Education.ix

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000 0137010591 FM.qxd11-11-201412:50Page xixiIntroductionThe Even You Can Learn Statistics andAnalytics Owners ManualIn today’s world, understanding statistics and analytics is more importantthan ever. Even You Can Learn Statistics and Analytics: A Guide for EveryoneWho Has Ever Been Afraid of Statistics and Analytics can teach you the basicconcepts that provide you with the knowledge to apply statistics andanalytics in your life. You will also learn the most commonly used statisticalmethods and have the opportunity to practice those methods while using theMicrosoft Excel spreadsheet program.Please read the rest of this introduction so that you can become familiar withthe distinctive features of this book. You can also visit the website for thisbook (www.ftpress.com/evenyoucanlearnstatistics3e) where you can learnmore about this book as well as download files that support your learning ofstatistics.Mathematics Is Always Optional!Never mastered higher mathematics—or generally fearful of math? Not toworry, because in Even

Even You Can Learn Statistics and Analytics: A Guide for Everyone Who Has Ever Been Afraid of Statistics and Analytics can teach you the basic concepts that provide you with the knowledge to apply statistics and analytics in your life. You will also learn the most commonly used statistical

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