Outliers

Objective of OLS

Leverage points

Influential points Non-influential points

INFLUENTIAL POINTS • OUTLIERS

• LEVERAGE POINTS WHICH CAN INFLUENCE THE MODEL

Measures of influence Cook’s D-statisticsThe Cook’s distance statistics is a measure of distance between the least-squares estimate based on all n observations in the model and the estimate obtained by deleting the ith point.

DFFITS and DFBETAS Indicates that how much the regression coefficient changes if the ith observation were deleted. Such change is measured in terms of standard deviation units

Effect of influence points • Reduction in performance of the model.

• Assumptions are usually not satisfied, hence influential points should be removed first before jumping to the corrective measure of the assumption validation.

• Note: all influential points should not be removed

R snapshot for checking the influential points