An Anecdote of Averages! | Data Driven Investor

Get to know the 3 M’s — Mean, Median, Mode of statistics a little deeper, they trick you more so often.

We encounter sentences like “The average salary of a teacher in the..”, almost on a daily basis, in newspapers, articles, reports etc. The number that is being reported as the so called average is not of much value to us and we cannot interpret much from it, as to what it really means, unless we figure out which one of the common kinds of average is being used in the context.

Mean, Median and Mode are the three common kinds of averages, each of them have a different mathematical formula and a different interpretation. These three are also called as the measures of central tendency. So let us have a quick walkthrough.

Mean: We are all familiar with all the three averages, but somehow, many of us think of only the “mean”, when we hear the word “average”. That’s how popular this guy is.

Mean has a straightforward formula and that is,

Median: The median is the middle value of a data set. The catch here is that the dataset (list of values) has to be ordered first, from lowest to highest value.

The number of values, let us denote it as n, in the dataset could be even or odd.