Probability and Statistics for Finance

Chapter 4. Graphical Representation of Data

In this chapter, we describe various ways of representing data graphically. Typically, graphs are more intuitively appealing than a table of numbers. As a result, they are more likely to leave an impression on the user. In general, the objective when using graphs and diagrams is to provide a high degree of information efficiency and with greater clarity. The intention is to present the information contained in the data as attractively as possible. Though there are numerous graphical tools available, the coverage in this chapter is limited to the presentation of the most commonly used types of diagrams. Some diagrams are suited for relative as well as absolute frequencies. Wherever possible, this is taken into consideration by thinking about the purposes for using one or the other. In general, diagrams cannot be used for all data levels. So with the introduction of each diagram, the data level issue is clarified.

We begin with the graphs suitable and most commonly used with data of categorical or rank scale. The use of diagrams is then extended to quantitative data with a countable value set so that individual values are clearly disjoint from each other by some given step or unit size, and to class data.

PIE CHARTS

The first graphical tool to be introduced is the pie chart, so-named because of the circular shape with slices representing categories or values. The size of the slices is related to the frequencies of the values represented by ...