Statistics for Management and Economics, Tenth Edition

Formulas

Numerical Descriptive techniques

Population mean

x
i 1
i
=
N

Sample mean

x
i 1
i
x
n

Range

Largest observation - Smallest observation

Population variance

( x )
i 1
i
2

2 =
N

Sample variance

(x
i 1
i x)2
s2 =
n 1
Population standard deviation

= 2

Sample standard deviation

s= s2

Population covariance
 N

( x
i 1
i x )( y i y )
xy
N

Sample covariance

( x
i 1
i x )( y i y )
s xy
n 1

Population coefficient of correlation

xy

x y

Sample coefficient of correlation

s xy
r
sxs y

Coefficient of determination

R2 = r2

Slope coefficient

s xy
b1
s x2

y-intercept

b0 y b1 x

Probability

Conditional probability

P(A|B) = P(A and B)/P(B)

Complement rule

C
P( A ) = 1 P(A)

Multiplication rule

P(A and B) = P(A|B)P(B)

P(A or B) = P(A) + P(B) - P(A and B)

Bayes Law Formula

P( A i ) P( B | A i )
P(A i | B)
P ( A 1 ) P( B | A 1 ) P( A 2 ) P( B | A 2 ) . . . P ( A k ) P ( B | A k )

Random Variables and Discrete Probability Distributions

Expected value (mean)

E(X) = xP( x )
all x

Variance

V(x) = 2 ( x ) P( x )
all x
2

Standard deviation

Covariance

COV(X, Y) = xy = ( x x )( y y )P( x , y )

Coefficient of Correlation

COV ( X , Y )

x y

Laws of expected value

1. E(c) = c

2. E(X + c) = E(X) + c

3. E(cX) = cE(X)

Laws of variance

1.V(c) = 0

2. V(X + c) = V(X)

2
3. V(cX) = c V(X)
Laws of expected value and variance of the sum of two variables

1. E(X + Y) = E(X) + E(Y)

2. V(X + Y) = V(X) + V(Y) + 2COV(X, Y)

Laws of expected value and variance for the sum of more than two variables

k k
1. E ( X i ) E ( X i )
i 1 i 1

k k
2. V ( X i ) V ( X i ) if the variables are independent
i 1 i 1

Mean and variance of a portfolio of two stocks

E(Rp ) = w1 E(R1 ) + w2 E(R2 )

V(Rp ) = w12 V(R1 ) + w22 V(R2 ) + 2 w1 w2 COV(R1 , R2 )

= w12 12 + w22 22 + 2 w1 w2 1 2

Mean and variance of a portfolio of k stocks

k
E(Rp ) = w E(R )
i 1
i i

k k k
V(Rp ) = i 1
wi2 i2 2 w w COV ( R , R
i 1 j i 1
i j i j)

Binomial probability

n!
P(X = x) = p x ( 1 p ) n x
x! ( n x )!

np

2 np( 1 p )

np( 1 p )

Poisson probability

e x
P(X = x) =
x!
Continuous Probability Distributions

Standard normal random variable

X
Z

Exponential distribution

1/

P(X x) e x

P(X x) 1 e x

P(x 1 X x 2 ) P(X x 2 ) P(X x 1 ) e x1 e x 2

F distribution

1
F1 A, 1 , 2 =
FA, 2 , 1

Sampling Distributions

Expected value of the sample mean

E( X ) x

Variance of the sample mean

2
V ( X ) 2x
n

Standard error of the sample mean

x
n

Standardizing the sample mean

X
Z
/ n

Expected value of the sample proportion

E(P ) p p

Variance of the sample proportion

Standard error of the sample proportion

p (1 p )
p
n

Standardizing the sample proportion

P p
Z
p (1 p ) n

Expected value of the difference between two means

E ( X 1 X 2 ) x1 x2 1 2

Variance of the difference between two means

12 22
V ( X 1 X 2 ) x21 x2
n1 n2

Standard error of the difference between two means

12 22
x1 x2
n1 n 2

Standardizing the difference between two sample means

( X 1 X 2 ) ( 1 2 )
Z
12 22

n1 n2

Introduction to Estimation

Confidence interval estimator of

x z / 2
n

Sample size to estimate

2
z
n /2
B
Introduction to Hypothesis Testing

Test statistic for

x
z
/ n

Inference about One Population

Test statistic for

x
t
s/ n

Confidence interval estimator of

s
x t / 2
n

Test statistic for 2

( n 1 )s 2
2
2

Confidence interval Estimator of 2

( n 1 )s 2
LCL =
2 / 2

( n 1 )s 2
UCL =
12 / 2

Test statistic for p

p p
z
p( 1 p ) / n

Confidence interval estimator of p

p z / 2 p( 1 p ) / n

Sample size to estimate p

2
z p( 1 p )
n /2
W

Confidence interval estimator of the total of a large finite population

s
N x t / 2
n

Confidence interval estimator of the total number of successes in a large finite population

p( 1 p
N p z / 2
n

Inference About Two Populations

Equal-variances t-test of 1 2

( x1 x 2 ) ( 1 2 )
t n1 n2 2
1 1
s 2p
n1 n 2

Equal-variances interval estimator of 1 2

1 1
( x1 x 2 ) t / 2 s 2p n1 n2 2
n1 n 2

Unequal-variances t-test of 1 2

( x1 x 2 ) ( 1 2 ) ( s12 / n1 s22 / n2 )2
t
s12 s 22 ( s12 / n1 )2 ( s22 / n2 )2

n1 n 2 n1 1 n2 1

Unequal-variances interval estimator of 1 2

s12 s 22 ( s12 / n1 s22 / n2 )2

t-Test of D

xD D
t nD 1
sD / nD

t-Estimator of D
 sD
x D t / 2 nD 1
nD

F-test of 12 / 22

s12
F= 1 n1 1 and 2 n2 1
s22

F-Estimator of 12 / 22

s2 1
LCL = 1
s2 F / 2 , ,
2 1 2

s2
UCL = 12 F / 2 , ,
s 2 1
2

z-Test and estimator of p1 p 2

( p1 p 2 )
Case 1: z
1 1
p( 1 p )
1
n n 2

( p1 p2 ) ( p1 p2 )
Case 2: z
p1( 1 p1 ) p2 ( 1 p2 )

n1 n2

z-estimator of p1 p 2

p1( 1 p1 ) p2 ( 1 p2 )
( p1 p2 ) z / 2
n1 n2

Chi-Squared Tests

Test statistic for all procedures

( f i ei ) 2
k
2
i 1
ei
Simple Linear Regression

Sample slope

s xy
b1
s x2

Sample y-intercept

b0 y b1 x

Sum of squares for error

n
SSE = ( y
i 1
i y i ) 2

Standard error of estimate

SSE
s
n2

Test statistic for the slope

b1 1
t
s b1

Standard error of b1

s
s b1
( n 1 )s x2

Coefficient of determination

2
s xy SSE
R2 1
s x2 s 2y ( y i y )2

Prediction interval

1 ( xg x )
2
y t / 2 ,n 2 s 1
n ( n 1 )s x2

Confidence interval estimator of the expected value of y

1 ( xg x )
2
y t / 2 ,n 2 s
n ( n 1 )s x2

Sample coefficient of correlation

Test statistic for testing = 0

n2
tr
1 r 2

Multiple Regression

Standard Error of Estimate

SSE
s
n k 1

Test statistic for i

bi i
t
s bi

Coefficient of Determination

2
s xy SSE
R2 1
s x2 s 2y ( yi y )2

Adjusted Coefficient of Determination

SSE /( n k 1 )
Adjusted R 2 1
( y y )
i
2
/( n 1 )

Mean Square for Error

MSE = SSE/k

Mean Square for Regression

MSR = SSR/(n-k-1)

F-statistic

F = MSR/MSE