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On regression analysis with data cleaning via trimming, winsorization, and dichotomization. (English) Zbl 1087.62080

Summary: In a two-variable regression model setup, we examine the effects of trimming and winsorization and dichotomization of the independent variable on the regression estimates and the efficiency of the regression estimation. These results have direct implications in the accounting literature when dealing with the effects of analyst forecast errors on stock returns.

MSC:

62J05 Linear regression; mixed models
62J99 Linear inference, regression
62P05 Applications of statistics to actuarial sciences and financial mathematics
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[1] Bollinger , C. R. , Chandra , A. ( 2003 ). Iatrogenic specification error: a cautionary tale of cleaning data . Technical Working Paper No. 289. Cambridge , Massachusetts , USA : National Bureau of Economic Research .
[2] DOI: 10.1086/209601 · doi:10.1086/209601
[3] DOI: 10.1016/0304-4076(81)90100-7 · doi:10.1016/0304-4076(81)90100-7
[4] DOI: 10.1111/1475-679X.t01-1-00055 · doi:10.1111/1475-679X.t01-1-00055
[5] DOI: 10.1002/0471722065 · doi:10.1002/0471722065
[6] Lopez T., J. Account. Audit. Fin. 17 pp 155– (2002)
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