he two major areas of statistics are known as descriptive statistics, which describes the properties of sample and population data, and inferential statistics, which uses those properties to test hypotheses and draw conclusions. Descriptive statistics include mean (average), variance, skewness, and kurtosis. Inferential statistics include linear regression analysis, analysis of variance (ANOVA), logit/Probit models, and null hypothesis testing.
Descriptive statistics mostly focus on the central tendency, variability, and distribution of sample data. Central tendency means the estimate of the characteristics, a typical element of a sample or population. It includes descriptive statistics such as mean, median, and mode.
Variability refers to a set of statistics that show how much difference there is among the elements of a sample or population along the characteristics measured. It includes metrics such as range, variance, and standard deviation.
The distribution refers to the overall "shape" of the data, which can be depicted on a chart such as a histogram or a dot plot, and includes properties such as the probability distribution function, skewness, and kurtosis. Descriptive statistics can also describe differences between observed characteristics of the elements of a data set. They can help us understand the collective properties of the elements of a data sample and form the basis for testing hypotheses and making predictions using inferential statistics.
Inferential statistics are tools that statisticians use to draw conclusions about the characteristics of a population, drawn from the characteristics of a sample, and to determine how certain they can be of the reliability of those conclusions. Based on the sample size and distribution, statisticians can calculate the probability that statistics, which measure the central tendency, variability, distribution, and relationships between characteristics within a data sample, provide an accurate picture of the corresponding parameters of the whole population from which the sample is drawn.
Inferential statistics are used to make generalizations about large groups, such as estimating average demand for a product by surveying a sample of consumers' buying habits or attempting to predict future events. This might mean projecting the future return of a security or asset class based on returns in a sample period.
Regression analysis is a widely used technique of statistical inference used to determine the strength and nature of the relationship (the correlation) between a dependent variable and one or more explanatory (independent) variables. The output of a regression model is often analyzed for statistical significance, which refers to the claim that a result from findings generated by testing or experimentation is not likely to have occurred randomly or by chance. It's likely to be attributable to a specific cause elucidated by the data.