Beware of ‘Good’ Outliers and Overoptimistic Conclusions

16 Pages Posted: 27 Apr 2009

See all articles by Catherine Dehon

Catherine Dehon

affiliation not provided to SSRN

Marjorie Gassner

affiliation not provided to SSRN

Vincenzo Verardi

FUNDP - University of Namur. CRED

Date Written: 0000

Abstract

The main goal of this paper is to warn practitioners of the danger of neglecting outliers in regression analysis, in particular, good leverage points (i.e. points lying close to the regression hyperplane but outlying in the x-dimension). While the types of outliers which do influence regression estimates (vertical outliers and bad leverage points) have been extensively investigated, good leverage points have been largely ignored, probably because they do not affect the estimated regression parameters. However, their effect on inference is far from negligible. We propose a step-by-step procedure to identify and treat all types of outliers. The paper of Persson and Tabellini [American Economic Review (2004) Vol. 94, pp. 25–46] linking the degree of proportionality of an electoral system to the size of government is discussed to illustrate how the choice of a measure and the existence of atypical observations may substantially influence results.

Suggested Citation

Dehon, Catherine and Gassner, Marjorie and Verardi, Vincenzo, Beware of ‘Good’ Outliers and Overoptimistic Conclusions (0000). Oxford Bulletin of Economics and Statistics, Vol. 71, Issue 3, pp. 437-452, June 2009, Available at SSRN: https://ssrn.com/abstract=1395138 or http://dx.doi.org/10.1111/j.1468-0084.2009.00543.x

Catherine Dehon (Contact Author)

affiliation not provided to SSRN

Marjorie Gassner

affiliation not provided to SSRN

No Address Available

Vincenzo Verardi

FUNDP - University of Namur. CRED ( email )

8 Rempart de la Vierge
Namur, 5000
Belgium

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