June 2003

Vol. 5, No. 6


Quality Quiz from Professor Cleary

Congratulations! 
You're right!

 

Coefficient of variation is a measure of how much variation exists in relation to the mean, so it represents a highly useful—and easily understood—concept in data analysis. But Dr. Noah Tahl’s guess was a meaningless collection of jargon picked up from a variety of sources. By obfuscating this simple technique, he was in fact robbing his trainees of the opportunity to gain another tool for data analysis.

The standard deviation alone is sometimes not particularly useful without a context within which one can determine meaning. For example, knowing that the standard deviation is 1.76 has no meaning; but understanding that a standard deviation of 2 had been anticipated gives a context that recognizes that variability is less than expected. Knowing that the standard deviation has historically been .5 or less for a particular dimension, on the other hand, would suggest that 1.76 is considered high. Without perspective, the figure for standard deviation has limited meaning.

The coefficient of variation provides a reference, by examining the ratio of a standard deviation to a mean.

If the number is large, the data has a great deal of variability with respect to the mean:


If the number is smaller, this reflects a small amount of variation relative to the mean:



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