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.



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