@article{c09bd83407554eb3a75af18a732af569,
title = "Identifying and Treating Outliers in Finance",
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.",
keywords = "outliers, univariate vs multivariate identification, robust regressions, winsorizing, trimming, bias",
author = "John Adams and Darren Hayunga and Sattar Mansi and David Reeb and Vincenzo Verardi",
note = "Funding Information: The authors would like to thank the editors Utpal Bhattacharya (Executive Editor) and Bing Han (Editor), an anonymous referee, Robert Andersen, Bo Becker, C.Y. Choi, Rachel Croson, Paul Goldsmith-Pinkham, Andrey Golubov, Jim Musumeci, David Rakowski, Jan Sokolowsky, Peter Westfall, Mahmut Yasar, Zeynep Senyuz, seminar participants at Virginia Tech and the University of Texas Arlington, and conference participants at the 2018 Financial Management Association Annual Conference, the 2018 Financial Management Association European Conference, and the 2017 World Finance Conference. Special thanks to Adam Harper, Vasanth Rajarajan, and Anurag Mehrotra for help with the data collection. Vincenzo Verardi gratefully acknowledges financial support from FNRS. Publisher Copyright: {\textcopyright} 2019 Financial Management Association International Copyright: Copyright 2019 Elsevier B.V., All rights reserved.",
year = "2019",
month = jun,
day = "1",
doi = "10.1111/fima.12269",
language = "English",
volume = "48",
pages = "345--384",
journal = "Financial Management",
publisher = "Chartered Institute of Mangament Accoutants",
number = "2",
}