Abstract
Janice Lent (2002) "A Note on the Effects of
Extreme Price Values on Price Indexes."
We examine the effects of extreme price values on the Fisher and
Tornqvist index formulas. Using a simple model, we first consider the
impact of outliers on the unweighted arithmetic, harmonic, and geometric
means of a collection of values. Then, under the same model, we
investigate the effect of a single extremely high or low price on the
price index formulas (weighted means). Our exploration leads to some
general rules regarding the relative robustness of the Fisher and
Tornqvist indexes. We illustrate these with empirical results based on
airfare data from the Department of Transportation's Origin and
Destination Survey.
Last Modified Date: March 19, 2003
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