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Outliers and Spatial Dependence in Cross-Sectional Regressions

Author

Listed:
  • Jesús Mur

    (Department of Economic Analysis, University of Zaragoza, Zaragoza, Spain)

  • Jørgen Lauridsen

    (The Econometric Group, Department of Economics, University of Southern Denmark, Odense, Denmark)

Abstract

Outliers are a risk factor in any econometric analysis. They are often observations that exert an excessive influence on the results and lower our confidence in the estimations. As a consequence, the attention given to their identification and treatment in the context of time series is not surprising. Our intention in the present paper is to advance in this same direction but now focusing the discussion on the impact of outliers on cross-sectional specifications. In particular, we will analyse the behaviour of the most habitual misspecification tests in this field in the presence of outliers. With this objective, we present a series of analytical results that try to delimit the effects suffered by these statistics and complete the study with a Monte Carlo exercise designed to measure their effect more precisely. According to our results, the impact of outliers can be very important, especially when several coincide in the sample.

Suggested Citation

  • Jesús Mur & Jørgen Lauridsen, 2007. "Outliers and Spatial Dependence in Cross-Sectional Regressions," Environment and Planning A, , vol. 39(7), pages 1752-1769, July.
    • Handle: RePEc:sae:envira:v:39:y:2007:i:7:p:1752-1769
    DOI: 10.1068/a38207
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    References listed on IDEAS

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    1. Davidson, James, 1994. "Stochastic Limit Theory: An Introduction for Econometricians," OUP Catalogue, Oxford University Press, number 9780198774037.
    2. Robert P. Haining, 1995. "Data Problems in Spatial Econometric Modeling," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax (ed.), New Directions in Spatial Econometrics, chapter 7, pages 156-171, Springer.
    3. Luc Anselin & Raymond J. G. M. Florax, 1995. "Small Sample Properties of Tests for Spatial Dependence in Regression Models: Some Further Results," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax (ed.), New Directions in Spatial Econometrics, chapter 2, pages 21-74, Springer.
    4. Douglas M. Hawkins, 1980. "Critical Values for Identifying Outliers," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 29(1), pages 95-96, March.
    5. Raymond J. G. M. Florax & Thomas Graaff, 2004. "The Performance of Diagnostic Tests for Spatial Dependence in Linear Regression Models: A Meta-Analysis of Simulation Studies," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax & Sergio J. Rey (ed.), Advances in Spatial Econometrics, chapter 2, pages 29-65, Springer.
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    Cited by:

    1. Fernando López Hernández, 2021. "In memoriam of Professor Jesús Mur (1961–2020)," Journal of Spatial Econometrics, Springer, vol. 2(1), pages 1-5, December.

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