Linked Questions

32
votes
6answers
3k views

Under which assumptions a regression can be interpreted causally?

First, don't panic. Yes, there are many similar question on this site. But I believe none gives a conclusive answer to the question below. Please bear with me. Consider a data generation process $\...
48
votes
5answers
110k views

What do "endogeneity" and "exogeneity" mean substantively?

I understand that the basic definition of endogeneity is that $$ X'\epsilon=0 $$ is not satisfied, but what does this mean in a real world sense? I read the Wikipedia article, with the supply and ...
35
votes
4answers
2k views

Are inconsistent estimators ever preferable?

Consistency is obviously a natural and important property of estimators, but are there situations where it may be better to use an inconsistent estimator rather than a consistent one? More ...
14
votes
3answers
7k views

Difference Between Simultaneous Equation Model and Structural Equation Model

Can anybody please help me to understand what are the differences between Simultaneous Equation Model and Structural Equation Model (SEM)? It will be great if somebody can provide me some literature ...
11
votes
3answers
1k views

Regression and causality in econometrics

In regression in general and in linear regression in particular causal interpretation about parameters is sometimes permitted. At least in econometrics literature, but not only, when causal ...
2
votes
3answers
243 views

In regression analysis, data generate model or model generate data?

I am learning regression analysis and in starting of that I have encountered two statements: S1: model generates data S2: data generates model Given that one is correct, so I picked up S2, thinking ...
1
vote
3answers
327 views

Endogeneity testing using correlation test

I am currently testing my linear model using OLS method. The last thing I have to test is endogeneity issue. Is it enough if I test each explanatory variable for correletion with error term? Than ...
19
votes
2answers
456 views

Minimizing bias in explanatory modeling, why? (Galit Shmueli's "To Explain or to Predict")

This question references Galit Shmueli's paper "To Explain or to Predict". Specifically, in section 1.5, "Explaining and Prediction are Different", Professor Shmueli writes: In explanatory ...
2
votes
2answers
296 views

Using LASSO to select model - can't infer, what does this mean?

I realize that when I use LASSO to select a model, I can't infer from it because it penalizes the coefficients to best fit the data. I'm just a little confused as to what exactly this means. Isn't ...
2
votes
2answers
802 views

What is the actual definition of endogeneity?

I've been learning about endogeneity but after looking around online I've gotten more and more confused about what the definition is. Most pages say that in a model $y=X\beta+\epsilon$ the definition ...
5
votes
1answer
1k views

Endogeneity in forecasting

I know that omitted variable bias isn't a major problem in forecasting, but are other endogeneity issues (such as simultaneity or measurement error) going to be a problem if I am only interested in ...
1
vote
1answer
78 views

Clarification on the assumptions $E[u|x]=0$ and the $x_i$ being fixed in repeated samples in Wooldridge Introductory Econometrics

The author is writing on the assumption $E[u|x]=0$. The part of the text which is not clear to me is this (the red lines emphasize where the critical portions are located) : In the first piece I don'...
1
vote
1answer
550 views

Does homoscedasticity imply that the regressor variables and the errors are uncorrelated?

By OLS regression equation: $$Y = a + bX + e$$ My thoughts are that homoscedasticity by definition imply that $Var(Y|X) = Var(e|X)=$ constant, then this would imply that $Var(e|X) = Var(e)$ which ...
5
votes
0answers
256 views

Structural equation and causal model in economics

Structural equations is a useful language for causal analysis in economics. In Causality Pearl (2009 cap 5) we can find the best discussion about this. My question: is possible to use the concept of ...