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- Title
Identifying and treating outliers in finance.
- Authors
Adams, John; Hayunga, Darren; Mansi, Sattar; Reeb, David; Verardi, Vincenzo
- Abstract
Outliers represent a fundamental challenge in the empirical finance research. We investigate whether the routine techniques used in finance research to identify and treat outliers are appropriate for the data structures we observe in practice. Specifically, we propose a multivariate identification strategy that can effectively detect outliers. We also introduce an estimator that minimizes the bias outliers caused in both cross‐sectional and panel regressions and provide outlier mitigation guidance. Using replications of four recently published studies in premier finance journals, we show how adjusting for multivariate outliers can lead to significantly different results.
- Subjects
FINANCIAL management; FINANCIAL research; ESTIMATION theory; OUTLIERS (Statistics); MULTIVARIATE analysis
- Publication
Financial Management (Wiley-Blackwell), 2019, Vol 48, Issue 2, p345
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/fima.12269