Z-Score Method Method

What is the Z-Score Method?

The Z-Score Method identifies outliers based on how many standard deviations a value is from the mean.

Formula

z = (x - mean) / standard_deviation

Thresholds

• |z| > 2: Moderate outliers
• |z| > 3: Common threshold for outliers
• |z| > 4: Extreme outliers

Advantages

• Intuitive: Easy to interpret (number of std devs)
• Standardized: Allows comparison across variables

Limitations

• Assumes Normal Distribution: Less reliable for skewed data
• Affected by Outliers: The mean and std are influenced by extreme values

Related Terms

• IQR Method: More robust alternative
• Standard Scaling: Uses same z-score transformation