In: Statistics and Probability
What is the impact of an outlier in the determination of an arithmetic mean?
Show by giving an example?
There is a drawback in the statistic of arithmetic mean as it is highly impacted by the presence of extreme values (outliers), whether large or small.
Example:
Consider observations: 2, 5, 8, 4, 6 and 9.
Arithmetic Mean:
x̅=1/n∑xi
Substitute values and n=6
x̅=1/6(34)
x̅=5.67
Now consider same observations but with 71 as an addirional observation: 2, 5, 8, 4, 6, 9 and 71.
Arithmetic Mean:
x̅=1/n∑xi
Substitute values and n=7
x̅=1/7(105)
x̅=15
The new arithmetic mean is nearly thrice that of earlier just because of the presence of single additional large observation.
There is a drawback in the statistic of arithmetic mean as it is highly distorted by the presence of extreme values (outliers), whether large or small.