Abstract
Owen Shoemaker "The Impact of High Variances at the Lowest Aggregate Levels on the CPI's All-US-All-Items Variance"
In 2006, the CPI’s All-US–All-Items 12-month standard errors increased by more than
50% over the previous year’s median average, returning to regular pre-2006 levels in
2007 and 2008. Since overall sample size had not been appreciably reduced in the 2006
time period, the analysis had to look elsewhere for an explanation for this rather
significant rise in the All-US–All-Items 12-month standard errors. Perhaps one or more
of the individual (replicate) variance pieces was contributing an inordinately high amount
of variance to the overall variance. A decomposition analysis of the Stratified Random
Groups variance calculation system was produced, and the results showed one or two
major contributors at the lowest aggregate level producing as much as half of the entire
All-US–All-Items variance. This paper will investigate the nature and genesis of these
anomalies, their impact on the overall CPI variance, and then compare how different
variance methodologies would have handled these anomalies.
Last Modified Date: February 16, 2012
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