*48*

ToÂ **winsorize**Â data means to set extreme outliers equal to a specified percentile of the data.

For example, a 90% winsorization sets all observations greater than the 95th percentile equal to the value at the 95th percentile and all observations less than the 5th percentile equal to the value at the 5th percentile.

This tutorial provides a step-by-step example of how to winsorize a dataset in Excel.

**Step 1: Create the Data**

First, weâ€™ll create the following dataset:

**Step 2: Calculate the Upper and Lower Percentiles**

For this example, weâ€™ll perform a 90% winsorization. This means weâ€™ll set all values greater than the 95th percentile equal to the 95th percentile and all values less than the 5th percentile equal to the 5th percentile.

The following formulas show how to find the 5th and 95th percentiles:

The 5th percentile turns out to beÂ **12.35** and the 95th percentile turns out to beÂ **92.05**.

**Step 3: Winsorize the Data**

Lastly, weâ€™ll use the following formula to winsorize the data:

Note that we just copy and pasted the formula in cell F2 down to the remaining cells in column F.

In this case, the valueÂ **3**Â became changed toÂ **12.35**Â and the valueÂ **98**Â became changed toÂ **92.05**.

Note that in this example we performed a 90% winsorization, but itâ€™s possible to also perform an 80% winsorization, 95% winsorization, 99% winsorization, etc. by simply calculating different upper and lower percentiles.