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Outlier vs Leverage vs Influence
You fit sales ~ ad_spend on 50 stores. Ad spend ranges from $5k to
$40k for 49 stores; one flagship store spends $180k. Two other rows
look odd:
- Store A: ad spend $22k, sales far above the fitted line (studentised residual 3.4).
- Store B (the flagship): ad spend $180k, sales sitting almost exactly on the fitted line (studentised residual 0.2).
Cook's distance is 0.09 for Store A and 1.8 for Store B.
- Classify each store as outlier, high-leverage, influential, or some combination, and justify using the numbers.
- Store B lies on the line and has a tiny residual. Why is its Cook's distance the largest in the dataset, and what would happen to the slope and its standard error if you removed it?
- Your stakeholder says "delete both, they're outliers." Give a defensible course of action for each store.
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