st: Removing outliers from my dataset

[Andreas Dall Frøseth <Andreas.Froseth@stud.nhh.no>]

Dear statalisters.

I'm still working with my dataset containing company data and accounting numbers for a large number of companies in the time periode 1992 to 2010. I've figured out the calculations in my last posting, but I'm currently experiencing some difficulties when trying to analyse the effect of outliers in my dataset.

For each company in the set, I have calculated ROA and sales growth each year. The problem is however, due to weaknesses in my dataset, some of the companies are now listed with unreasonable values of ROA. I.e. one of the companies have a ROA of 6500 %. I have ensures myself that this is not due too a miscalculation, but rather due to accounting rules and newly listed companies.
I therefore wish to examine my dataset, and, if possible, get rid of outliers. My main idea is to calculate a mean industry ROA (the set contains a variable "industry", with a industry-indicator for each company. Ex. 4 = fishing), and setting a bottom and top limit for each industry. Do anyone have input on the most appropriate way to do this? It seems to be several different approaches I apply, ie 2 standard deviations from the mean or 1 and 99-percentile.

I would also appreciate input on how to do this in STATA. Creating an industry mean, and a variable indicating wich companies to exclude from my population based on a recommended approach.

All feedback will be appreciated.

Kind regards
Andreas
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