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Published by MBA Skool Team, Last Updated: May 29, 2013

**Leverage Points** is an observation which usually lies away from the rest of the data on the x-y plane but lies close to the regression line when extended. This regression line is determined by the data other than the leverage point.

A point is determined as a leverage point based on the location of the point on the x-space and hence remote points impart more on the parameters of the model. To identify a leverage point, a hat matrix:

**H= X(X’X) ^{-1}X’**

is used.

If a data point *i,* is moved up or moved down, the corresponding fitted value y_{i}’moves proportionally to the change in y_{i}*. *The proportionality constant used is called Leverage which is denoted by *h _{i}.*Hence each data point has a leverage value. The entries on the diagonal for the matrix H determines the measure for how far the i

Hence, this concludes the definition of Leverage Points along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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