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Statistics: What is an outlier? Bias?

Suppose we look at real estate sales for an older neighborhood with similar houses. Suppose the prices range from $200k to $300k. In this case, the mean and median measures will be similar. Now suppose that a house burns down and catches the house next door on fire. Before long, someone builds a large house across the two empty lots. The value of that house might be $750k. Now the mean will be much higher but the median will stay the same. Here is some data for practice:

Before data:
$200, $250, $300
Mean = median = $250

After data:
$200, $250, $300, $750
Mean = $375, Median = $275


What are the statistical definitions for:
â?¢How do these terms apply to this example?
I look forward to your research,

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Solution Preview

An outlier is one that is far off from the rest of the data points. Clearly the $750 home is an outlier in the neighborhood where the middle-of-the-pack home (median) and the average price (mean) were the same. Now the mean is ...

Solution Summary

Your response is 139 words in everyday language suitable for a novice. It explains outliers and how bias is not in play in this example.