Institute of Chartered Accountants

of India 1
DATA ANALYSIS
What is a Data Analysis
Data analysis is a practice in which raw data is ordered and
organized so that useful information can be extracted from it.


It can also be said that Data Analysis is a process of inspecting,
cleaning, transforming, and modeling data with the goal of
highlighting useful information, suggesting conclusions, and
supporting decision making.


Data analysis has multiple facets and approaches, encompassing
diverse techniques under a variety of names, in different business,
science, and social science domains.
Importance of Data Analysis
No business can survive without analyzing available data.
Whether one wants to arrive at some marketing decisions or fine-
tune new product launch strategy, data analysis is the key to all the
problems.

Data analysis is not a decision making system, but decision
supporting system.

Data analysis can offer the following benefits:

Structuring the findings from survey research or other means of
data collection.
Break a macro picture into a micro one.
Acquiring meaningful insights from the dataset.
Basing critical decisions from the findings.
Ruling out human bias through proper statistical treatment.


Process Data Analysis
Initial data analysis
1 Quality of data
2 Quality of measurements
3 Initial transformations
4 Did the implementation of the study fulfill the intentions of
the research design?
5 Characteristics of data sample
6 Final stage of the initial data analysis
7 Analyses
Main data analysis

1 Exploratory and confirmatory approaches
2 Stability of results
3 Statistical methods
Initial Data Analysis
Quality of data

Data quality can be assessed in several ways, using different types of analyses:
frequency counts, descriptive statistics (mean, standard deviation, median),
normality (skewness, kurtosis, frequency histograms, normal probability plots),
associations (correlations, scatter plots).

Other initial data quality checks are:

Checks on data cleaning: The distribution of the variables before data cleaning is
compared to the distribution of the variables after data cleaning to see whether data
cleaning has had unwanted effects on the data.

Analysis of missing observations: are there many missing values, and are the values
missing at random? The missing observations in the data are analyzed to see
whether more than 25% of the values are missing, whether they are missing at
random (MAR), and whether some form of imputation is needed.

Analysis of extreme observations: outlying observations in the data are analyzed to
see if they seem to disturb the distribution.
Initial Data Analysis
Contd.
Quality of Measurement

The quality of the measurement instruments should only be checked
during the initial data analysis phase when this is not the focus or research
question of the study.

One should check whether structure of measurement instruments
corresponds to structure reported in the literature.

There are two ways to assess measurement quality:

Confirmatory factor analysis
Analysis of homogeneity (internal consistency), which gives an indication
of the reliability of a measurement instrument. During this analysis, one
inspects the variances of the items and the scales.
Initial Data Analysis
Contd.
Initial transformations

After assessing the quality of the data and of the measurements, one might
decide to impute missing data, or to perform initial transformations of one
or more variables, although this can also be done during the main analysis
phase.
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Possible transformations of variables are:
Square root transformation (if the distribution differs moderately from
normal)
Log-transformation (if the distribution differs substantially from normal)
Inverse transformation (if the distribution differs severely from normal)
Make categorical (ordinal / dichotomous) (if the distribution differs
severely from normal, and no transformations help)
Initial Data Analysis
Contd.
Did the implementation of the study fulfill the intentions of the research
design?

One should check the success of the randomization procedure, for instance
by checking whether background and substantive variables are equally
distributed within and across groups.

If the study did not need and/or use a randomization procedure, one
should check the success of the non-random sampling, for instance by
checking whether all subgroups of the population of interest are
represented in sample.

Other possible data distortions that should be checked are:

dropout (this should be identified during the initial data analysis phase)
Item non-response (whether this is random or not should be assessed
during the initial data analysis phase)
Treatment quality (using manipulation checks)
Initial Data Analysis
Contd.
Characteristics of data sample

In any report or article, the structure of the sample must be accurately
described. It is especially important to exactly determine the structure of
the sample (and specifically the size of the subgroups) when subgroup
analyses will be performed during the main analysis phase.

The characteristics of the data sample can be assessed by looking at:

Basic statistics of important variables
Scatter plots
Correlations
Cross-tabulations
Initial Data Analysis
Contd.
Final stage of the initial data analysis

During the final stage, the findings of the initial data analysis are
documented, and necessary, preferable, and possible corrective actions are
taken.

Also, the original plan for the main data analyses can and should be
specified in more detail and/or rewritten.

In order to do this, several decisions about the main data analyses can and
should be made:

In the case of non-normals: should one transform variables; make
variables categorical (ordinal/dichotomous); adapt the analysis method?
In the case of missing data: should one neglect or impute the missing
data; which imputation technique should be used?
In the case of outliers: should one use robust analysis techniques?
In case items do not fit the scale: should one adapt the measurement
instrument by omitting items, or rather ensure comparability with other
(uses of the) measurement instrument(s)
Initial Data Analysis
Contd.
Analyses

Several analyses can be used during the initial data analysis phase:

Univariate statistics

Bivariate associations (correlations)

Graphical techniques (scatter plots)
Main Analysis
Exploratory and confirmatory approaches

In the main analysis phase either an exploratory or confirmatory approach can be
adopted. In an exploratory analysis no clear hypothesis is stated before analyzing
the data, and the data is searched for models that describe the data well. In a
confirmatory analysis clear hypotheses about the data are tested.

Exploratory data analysis should be interpreted carefully. When testing multiple
models at once there is a high chance on finding at least one of them to be
significant, but this can be due to a type 1 error.

One should not follow up an exploratory analysis with a confirmatory analysis in the
same dataset. An exploratory analysis is used to find ideas for a theory, but not to
test that theory as well. When a model is found exploratory in a dataset, then
following up that analysis with a confirmatory analysis in the same dataset could
simply mean that the results of the confirmatory analysis are due to the same type 1
error that resulted in the exploratory model in the first place. The confirmatory
analysis therefore will not be more informative than the original exploratory analysis
Main Analysis
Contd.
Stability of results

It is important to obtain some indication about how generalizable the
results are. While this is hard to check, one can look at the stability of the
results. Are the results reliable and reproducible? There are two main ways
of doing this:

Cross-validation: By splitting the data in multiple parts we can check if
analyzes (like a fitted model) based on one part of the data generalize to
another part of the data as well.

Sensitivity analysis: A procedure to study the behavior of a system or
model when global parameters are (systematically) varied. One way to do
this is with bootstrapping.
Main Analysis
Contd.
Statistical methods

A lot of statistical methods have been used for statistical analyses. A very
brief list of four of the more popular methods is:

General linear model: A widely used model on which various statistical
methods are based (e.g. t test, ANOVA, ANCOVA, MANOVA). Usable for
assessing the effect of several predictors on one or more continuous
dependent variables.

Generalized linear model: An extension of the general linear model for
discrete dependent variables.

Structural equation modelling: Usable for assessing latent structures from
measured manifest variables.

Item response theory: Models for (mostly) assessing one latent variable
from several binary measured variables (e.g. an exam).
RESEARCH METHODOLOGY
What is research
Research in common parlance refers to a search for knowledge.

Once can also define research as a scientific and systematic search for
pertinent information on a specific topic.

In fact, research is an art of scientific investigation.

The Advanced Learners Dictionary of Current English lays down the
meaning of
research as a careful investigation or inquiry specially through search
for new
facts in any branch of knowledge.

Research is, thus, an original contribution to the existing stock of
knowledge making for its advancement. It is the pursuit of truth with the
help of study, observation, comparison and experiment.
Characteristics of research
-Controlled- The concept of control implies that, in exploring causality in
relation to two variables (factors), you set up your study in a way that
minimizes the effects of other factors affecting the relationship.

-Rigorous-you must be scrupulous in ensuring that the procedures
followed to find answers to questions are relevant, appropriate and
justified. Again, the degree of rigor varies markedly between the physical
and social sciences and within the social sciences.

-Systematic-this implies that the procedure adopted to undertake an
investigation follow a certain logical sequence. The different steps cannot
be taken in a haphazard way. Some procedures must follow others.

-Valid and verifiable-this concept implies that whatever you conclude on
the basis of your findings is correct and can be verified by you and others.

-Empirical-this means that any conclusion drawn are based upon hard
evidence gathered from information collected from real life experiences or
observations.

Objectives of research
The purpose of research is to discover answers to questions through the
application of scientific procedures. The main aim of research is to find out
the truth which is hidden and which has not been discovered as yet.
Though each research study has its own specific purpose, we may think of
research objectives as falling into a number of following broad groupings:

1. To gain familiarity with a phenomenon or to achieve new insights into it
(studies with this object in view are termed as exploratory or formulative
research studies);
2. To portray accurately the characteristics of a particular individual,
situation or a group (studies with this object in view are known as
descriptive research studies);
3. To determine the frequency with which something occurs or with which
it is associated with something else (studies with this object in view are
known as diagnostic research studies);
4. To test a hypothesis of a causal relationship between variables (such
studies are known as hypothesis-testing research studies).
The research process or methodology
The research process is similar to undertaking a journey.

For a research journey there are two important decisions to make-
1) What you want to find out about
or what research questions (problems) you want to find answers to;
2) How to go about finding their answers.

There are practical steps through which you must pass in your research
journey in order to find answers to your research questions.
The path to finding answers to your research questions constitutes
research methodology.

At each operational step in the research process you are required to choose
from a multiplicity of methods, procedures and models of research
methodology which will help you to best achieve your objectives.

This is where your knowledge base of research methodology plays a crucial
role.
The research process or methodology
Contd.
Steps in Research Process:

1. Formulating the Research Problem

2. Extensive Literature Review

3. Developing the objectives

4. Preparing the Research Design including Sample Design

5. Collecting the Data

6. Analysis of Data

7. Generalization and Interpretation

8. Preparation of the Report or Presentation of Results-Formal write ups of
conclusions reached.
The research methodology A graphical example.
Institute of Chartered Accountants
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