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Construction of composite indices in presence of outliers

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Author Info
Mishra, SK

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Abstract

Effects of outliers on mean, standard deviation and Pearson’s correlation coefficient are well known. The Principal Components analysis uses Pearson’s product moment correlation coefficients to construct composite indices from indicator variables and hence may be very sensitive to effects of outliers in data. Median, mean deviation and Bradley’s coefficient of absolute correlation are less susceptible to effects of outliers. This paper proposes a method to obtain composite indices by maximization of the sum of absolute Bradley’s correlation coefficients between the indicator variable and the derived composite index.

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File URL: http://mpra.ub.uni-muenchen.de/8874/
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File URL: http://mpra.ub.uni-muenchen.de/8923/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8874.

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Date of creation: 26 May 2008
Date of revision: 01 Jun 2008
Handle: RePEc:pra:mprapa:8874

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Related research
Keywords: Composite index; Principal Components analysis; absolute; Bradley’s correlation coefficient; outliers; median; mean deviation; Differential Evolution; global optimization;

Other versions of this item:

Find related papers by JEL classification:
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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References listed on IDEAS
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  1. Mishra, SK, 2007. "Performance of Differential Evolution Method in Least Squares Fitting of Some Typical Nonlinear Curves," MPRA Paper 4634, University Library of Munich, Germany, revised 31 Aug 2007. [Downloadable!]
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