Notebook LM Flashcards
What are the consequences of OMVB?
OMVB can result in an overstatement or understatement of the true impact of an independent variable on a dependent variable.
What is omitted variable bias (OMVB)?
OMVB is the bias in the estimate of a slope parameter that occurs when a relevant variable is left out of a regression model.
What is perfect collinearity?
Perfect collinearity is when one independent variable in a regression model can be expressed as an exact linear function of one or more other independent variables.
What is the objective of the OLS estimation procedure in multivariate regression?
OLS estimation aims to find parameter values that minimize the sum of squared error terms.
How does the multivariate model address OMVB?
The multivariate model addresses OMVB by controlling for the omitted variable, effectively purging the variation in the variable of interest of its relationship with the omitted variable.
What does holding all else constant in the interpretation of a coefficient mean?
Holding all else constant means estimating the relationship between variables by comparing across similar types of individuals, controlling for other relevant factors.
What is the purpose of including an interaction term in a regression model?
Interaction terms allow for the relationship between one independent variable and the dependent variable to vary based on the value of another independent variable.
How is the coefficient on an interaction term interpreted?
The coefficient on an interaction term reflects the difference in the relationship between an independent variable and the dependent variable for a one-unit increase in the interacting variable.
How can we interpret an interaction term between a continuous variable and a binary variable (e.g., gender)?
The interaction term shows how the relationship between the continuous variable and the outcome differs between the two groups represented by the binary variable.
What does an interaction term between a continuous variable and itself (e.g., age and age squared) capture?
This interaction captures non-linear relationships between the continuous variable and the outcome.
What is a t-statistic used for in multivariate regression?
A t-statistic tests whether an estimated coefficient is statistically different from zero.
What are the key factors that influence the variance of an OLS estimate?
The variance of an OLS estimate is influenced by the error variance, the total variation in the independent variable, and the correlation between the independent variable and other regressors in the model.
Why is an F-test used for testing multiple restrictions in multivariate regression?
The F-test is used for joint hypothesis tests involving multiple restrictions, ensuring the correct size and preventing over-rejection of the null hypothesis.
What is the difference between an unrestricted and a restricted model in the context of an F-test?
The unrestricted model does not impose constraints implied by the null hypothesis, while the restricted model imposes those constraints.
