Consider the four outliers in the 2012 revenue data: companies with revenue of $237 billion, $246 billion, $447 billion, and $453 billion. if we removed these companies from the data set, what would happen to the standard deviation?

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09-09-2018
Business

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Consider the four outliers in the 2012 revenue data: companies with revenue of $237 billion, $246 billion, $447 billion, and $453 billion. if we removed these companies from the data set, what would happen to the standard deviation?

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Rupicapra Rupicapra · Answer 1 · 2018-09-19T08:50:36+02:00

Answer: When we remove outliers from a data set, the sum total of all the values in the data set will decrease by the total value of outliers removed. The total number of observations will also decrease. The new mean will be lesser than the mean of the original data set.

Since the standard deviation measures the deviations from the mean, the outliers affect the value of standard deviation too.

When these outliers are removed, the deviations from the mean will also decrease and the standard deviation will be lesser than the standard deviation observed in the data set that had outliers.