Anomaly/Outlier Detection using Local Outlier Factors - DataScienceCentral.com

Outliers are patterns in data that do not confirm to the expected behavior. While detecting such patterns are of prime importance in Credit Card Fraud, Stock Trading etc. Detecting anomaly or outlier observations are also of importance when training any of the supervised machine learning models. This brings us to two very important questions: concept of a local outlier, and why a local outlier? In a multivariate dataset where the rows are generated independently from a probability distribution, only using centroid of the data might not alone be sufficient to tag all the outliers. Measures like Mahalanobis distance might be able to identify extreme observations but won't be able to label all possible outlier observations.