Applied Business Methods 2014 - 2015

Formulas
Numerical Descriptive techniques
Population mean
N

i =1

Sample mean
n

x=

i =1

Range
Largest observation - Smallest observation
Population variance
N

( x )

2 =

i =1

Sample variance
n

s2 =

(x
i =1

x)2

n 1

Population standard deviation

Sample standard deviation

s2

Population covariance

( x

x )( y i y )

i =1

xy =

Sample covariance
n

( x

x )( y i y )

i =1

s xy =

n 1

Population coefficient of correlation

xy

x y

Sample coefficient of correlation

s xy
sxsy

Coefficient of determination
R2 = r2

Slope coefficient
b1 =

s xy
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)

Addition rule
P(A or B) = P(A) + P(B) - P(A and B)
Bayes Law Formula
P(A i | B) =

P(A i )P(B | A i )
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)

xP( x )

all x

Variance
=
V(x) 2 =

( x ) P( x )
2

all x

Standard deviation
= 2

Covariance
COV(X, Y) = xy =

( x

Coefficient of Correlation

COV ( X ,Y )

x y

Laws of expected value

3. V(cX) = c V(X)

)( y y )P( x , y )

Laws of expected value and variance of the sum of two variables

2. V (

i =1

i =1

i =1

i =1

X i ) = E( X i )

X i ) = V ( X i ) if the variables are independent

Mean and variance of a portfolio of two stocks

E(Rp) =

w E(R )
i

i =1

V(Rp) =

wi2 i2 + 2

i =1

w w COV ( R , R
i

i =1 j =i +1

Binomial probability
P(X = x) =

n!
p x ( 1 p )n x
x! ( n x )!

= np

2 = np( 1 p )

= np( 1 p )
Poisson probability
P(X = x) =

e x
x!

j)

Continuous Probability Distributions

Standard normal random variable

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

F1 A, 1 , 2 =

1
FA, 2 , 1

Sampling Distributions

Expected value of the sample mean

Variance of the sample mean

2
n

Standard error of the sample mean

Standardizing the sample mean

X
/ n

Expected value of the sample proportion

Variance of the sample proportion

p(1 p)
V ( P ) = 2p =
n

Standard error of the sample proportion

p(1 p )
n

Standardizing the sample proportion

P p
p (1 p) n

Expected value of the difference between two means

Variance of the difference between two means

12
n1

22
n2

Standard error of the difference between two means

12 22
+
n1 n 2

Standardizing the difference between two sample means

( X 1 X 2 ) ( 1 2 )

12
n1

22
n2

Introduction to Estimation

Confidence interval estimator of

Sample size to estimate

Introduction to Hypothesis Testing

Test statistic for

/ n

Inference about One Population

Test statistic for

x
s/ n

Confidence interval estimator of

s
n

Test statistic for 2

2 =

( n 1 )s 2

Confidence interval Estimator of 2

UCL =

( n 1 )s 2

2 / 2
( n 1 )s 2

12 / 2

Test statistic for p

p p
p( 1 p ) / n

Confidence interval estimator of p

Sample size to estimate p

n= /2

Confidence interval estimator of the total of a large finite population

s
N x t / 2

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

N p z / 2

p( 1 p

Inference About Two Populations

Equal-variances t-test of 1 2
t=

( x1 x 2 ) ( 1 2 )
1
1
s 2p +
n1 n 2

= n1 + n 2 2

Equal-variances interval estimator of 1 2

( x1 x 2 ) t / 2 s 2p +
n1 n 2

= n1 + n 2 2

Unequal-variances t-test of 1 2
t=

( x1 x 2 ) ( 1 2 )
s12 s 22

+
n1 n 2

( s12 / n1 + s22 / n2 )2
( s12 / n1 )2 ( s22 / n2 )2
+
n1 1
n2 1

Unequal-variances interval estimator of 1 2

s12 s 22
+
n1 n 2

t-Test of D
t=

xD D
sD / nD

t-Estimator of D

= nD 1

( s12 / n1 + s22 / n2 )2
( s12 / n1 )2 ( s22 / n2 )2
+
n1 1
n2 1

x D t / 2

sD

= nD 1

nD

F-test of 12 / 22
=
F

s12
s22

1 = n1 1 and 2 = n 2 1

F-Estimator of 12 / 22
s2
LCL = 12
s
2

F / 2 , ,

1 2

s2
UCL = 12
s
2

F / 2 , ,
2 1

z-Test and estimator of p1 p 2

Case 1: z =

Case 2:

1
1
p( 1 p ) +

n
n
2
1

z=

( p1 p2 ) ( p1 p2 )
p1( 1 p1 ) p2 ( 1 p2 )
+
n1
n2

z-estimator of p1 p 2
p1( 1 p1 ) p2 ( 1 p2 )
+
n1
n2

( p1 p2 ) z / 2

Analysis of Variance

One-way analysis of variance

SST =

n (x
j

x )2

j =1

SSE =

( x
j =1

MST =

nj

i =1

SST
k 1

ij

x j )2

SSE
nk

=
MSE
=
F

MST
MSE

Two-way analysis of variance (randomized block design of experiment)

SS(Total) =

( x
j =1

x )2

i =1

SST =

ij

b( x [ T ]

x )2

i =1
b

SSB =

k( x [ B ] x )

i =1
k

=
SSE

( x

ij

j =1

MST =

x [ T ] j x [ B ]i + x )2

i =1

SST
k 1

=
MSB

SSB
b 1

=
MSE

SSE
n k b +1

=
F
F=

MST
MSE
MSB
MSE

Two-factor experiment
a

( x

SS(Total)
=

ijk

i =1 j =1 k =1

SS(A) = rb

( x [ A ] x )
i

i =1

SS(B) = ra

( x [ B ]
j =1

x )2

x )2

SS(AB) = r

( x [ AB ]

ij

x [ A ]i x [ B ] j + x )2

i =1 j =1

( x

=
SSE

ijk

x [ AB ]ij )2

i =1 j =1 k =1

F=

MS(A)
MSE

F=

MS(B)
MSE

F=

MS(AB)
MSE

Least Significant Difference Comparison Method

Tukeys multiple comparison method

= q ( k , )

MSE
ng

Chi-Squared Tests

Test statistic for all procedures

2 =

i =1

( f i ei ) 2
ei

Simple Linear Regression

Sample slope
b1 =

s xy
s x2

Sample y-intercept
b0 = y b1 x

Sum of squares for error

( y

=
SSE

y i ) 2

i =1

Standard error of estimate

s =

Test statistic for the slope

b1 1
s b1

Standard error of b1
s b1 =

s
( n 1 )s x2

Coefficient of determination
2

R =

2
s xy

s x2 s 2y

= 1

SSE

( y

y )2

Prediction interval
y t / 2 ,n 2 s 1 +

2
1 ( xg x )
+
n ( n 1 )s x2

Confidence interval estimator of the expected value of y

2
1 ( xg x )
+
n ( n 1 )s x2

Sample coefficient of correlation

s xy
sxsy

Test statistic for testing = 0

n2
1 r 2

Multiple Regression

Standard Error of Estimate

s =

Test statistic for i

bi i
s bi

Coefficient of Determination
R2 =

2
s xy

= 1

s x2 s 2y

SSE

( y

y )2

Adjusted Coefficient of Determination

Mean Square for Error

Durbin-Watson statistic
n

d=

( e

ei 1 ) 2

i =2

e
i =1

2
i

SSE /( n k 1 )
( yi y )2 /( n 1 )