For this outlier detection method, the mean and standard deviation of the residuals are calculated and compared. If a value is a certain number of standard deviations away from the mean, that data point is identified as an outlier. The specified number of standard deviations is called the threshold. The default value is 3.
This method can fail to detect outliers because the outliers increase the standard deviation. The more extreme the outlier, the more the standard deviation is affected.