Detect and Handle Outliers in SQL

Context

Outliers can heavily affect averages, thresholds, and business reporting. In SQL workflows, analysts are often expected to identify unusual values and decide whether to remove, cap, or flag them before further analysis.

Question

Explain how you would detect and handle outliers in a dataset using SQL. Your answer should cover:

1. Common ways to identify outliers, such as fixed thresholds, standard deviation, and percentile-based methods
2. How SQL can be used to flag or transform outlier rows
3. When to remove outliers versus keep them and label them separately
4. Risks of handling outliers incorrectly

Scope Guidance

The interviewer expects a practical conceptual answer: describe the methods, trade-offs, and how you would implement them in SQL at a high level. You do not need advanced statistical theory, but you should show sound judgment about data quality and business context.