Limitations of Statistics

Statistics is a field of study where data is presented in the form of numbers and then that data is analyzed and results of that analyzed data is made available for interpretation by interested parties. Statistics in majority of cases takes into account only sample and not the whole population. It can be better understood with the help of real life example suppose you go to market for purchasing a box of apple and while buying it you won’t look at each and every apple in the box rather you will look only 1 or 2 apple from box and then decide whether to buy the box of apple or not, in the same way statistics analyze the samples from the whole population and then interpret its results.  Statistics is widely used in the field of finance, however statistics like all other field of study is not free from limitations; let’s look at some of the limitations of statistics –

  1. The first and foremost limitation of statistics is that it looks into only that data which can be quantified in numbers and it ignores qualitative things. So for example while collecting data related to companies statistics takes into account data like sales, profit, operating expenses but ignores qualitative aspects like health of CEO, honesty of employees of the company and so on and thus end up giving incomplete picture about the company. The same logic can be extended to other fields of study as well where statistics is used.
  2. Statistics can be interpreted in many ways and thus there is scope of misuse by the person who is collecting and interpreting the data because different individuals will interpret the data differently leading to personal bias of statistician and hence the whole purpose and exercise of collecting and analyzing the data will fail.
  3. Statistics in order to be successful requires that data should be homogenous and not heterogeneous, in simple words all the data which is under observation should be of same nature and not mixed and therefore statistics cannot be used for diverse data.
  4. Since in majority of cases statistics takes into account only sample size and not the whole population and hence it is not 100 percent accurate and tend to reflect the observations based on sample which in turn may not reflect the true picture as the behavior of whole population may be different from small sample size.
  5. Statistics does not study individuals and it is always meant for group and hence when individual are needed to be studied statistics is not relevant and hence limits its use and scope.

0 comments… add one

Leave a Comment


Related pages


advantage of dictatorshipformula for degree of operating leveragecrossing chequesmarginal costing approachshort term loan advantages and disadvantagesdisadvantage of oligopolyconsignor definitioncrossed chequebill discounting without recourseadvantages of fifoadvantages and disadvantages of mergers and takeoversjain irrigation dvran autocratic leaderadvantages of advertising to manufacturersdefine cost push inflationadvantages and disadvantages of payback perioddemerits of socialismwhat is full form of micrdisadvantages of cash managementdemocratic style of management advantages and disadvantagesplanned economy examplesexamples mixed economycontingent liability accountingwhat is direct and indirect quotationdeflation economics helpskimming pricing strategy examplethe difference between monopoly and oligopolyadvantages and disadvantages of evaglobalization benefits and drawbacksconglomerate corporation definitionadvantages and disadvantages of social media marketingeconomic systems advantages and disadvantagesfull form of slr in bankinghorizontal analysis of financial statementsa2z maintenance & engineering servicesaccounting relevant costvertical analysis financial statementsdifference between process costing and job costingbill discounting definitioncash inflowstransfer pricing disadvantagessole proprietorship features advantages and disadvantagespricing strategies skimmingglobalization advantages disadvantagesconglomerate merger definitionexamples of horizontal mergersexamples of unearned revenuelocal bill discountinga report on procedure of opening a demat accountdisadvantages of convertible bondswhat is the disadvantage of globalizationdifference between tax and tariffmeaning of crossing of chequedisadvantages of low cost strategyexamples of consumer durablesadvantages and disadvantages of fifo and lifoadvantages and disadvantages of capitalism and socialisminventory turnover ratio interpretationdrawbacks of advertisingdisadvantages of commodity moneyunearned revenue entrydurable and nondurable productsmerits and demerits of socialist economyexamples of mixed economic systemdupont equation analysisintraday tradespayment received in advance journal entrydiscounting bill of exchangeexample of prepaid expensesimilarities between public finance and private financepricing strategies advantages and disadvantagessemi durable goods definitionwhat is substitution effect in economicsdefine mixed economic systemexamples of vertical mergerautocratic leadership pptipo fullformobjectives of demat accountecs system in bank