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Guide to Selecting Visualization Types
- For numerical data, use a histogram, frequency polygon, or cumulative distribution chart.
- For category-based data, use a bar chart, tree-map, or heat map.
- For unstructured data, use a word cloud.
- For displaying relationships between two variables, use a scatter plot.
- For displaying relationships among more than two variables, use a scatter plot matrix or heat map.
- For displaying numerical data distributions, use a histogram, frequency polygon, or cumulative distribution chart.
- For displaying categorical data, use a bar chart, tree-map, or heat map.
- To draw a comparison over time, use a line chart for two variables and a bubble line chart for three.
- For drawing a comparison among categories, use a bar chart, tree-map, or heat map.
Common Pitfalls
The following are the four common pitfalls that we should avoid while using charts and graphs:
- Selecting the wrong chart type will occsion an inaccurate interpretation of data.
- Selectively plotting data could prove an inaccurate relationship.
- Data plotted in a truncated graph, e.g., having a y-axis that does not start at zero, could inaccurately show significant differences when there is really just a small difference.
- Scaling the axes incorrectly, for instance, by setting a maximum that is higher than necessary on the y-axis, can result in a graph that appears less steep and less volatile.
Question
Which of the following graphs is the most appropriate to use for plotting stock price change over a five-year period?
- Line chart.
- Bubble line chart.
- Frequency polygon.
Solution
The correct answer is A.
A line chart is used to display the change of data series over time.
B is incorrect. In a bubble line chart, data points are represented by bubbles of varying sizes. The bubbles represent a third dimension of the data.
C is incorrect. The frequency polygon and the cumulative frequency distribution chart are also line charts. However, they represent data frequency distributions.
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Strengthen your understanding of selecting appropriate data visualization types, charts, graphs, and quantitative analysis techniques with CFA Level I study notes, practice questions, and mock exams.
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2021-07-23
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2021-07-17
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