RE: st: collin

[DE SOUZA Eric <eric.de_souza@coleurope.eu>]

I haven't been following this thread till now.
Jeffrey Wooldridge in his introductory textbook (page 99, international edition) does not encourage use of the VIF . The variance of a coefficient depends on three factors: the standard error of the regression, the total sample variation in the variable attached to the coefficient and the partial R2 . Concentrating on the partial R2 has no justification, even less so the rule of 10.

However, in this case, the referee will probably have to be satisfied in some way or the other.

Aggie, when you say that the dummies were dropped on account of collinearity, what exactly do you mean? 

Eric 


Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu


-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Syed Basher
Sent: 12 March 2011 11:57
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: collin

Dear Aggie,

I recently used VIF in one of my papers. You can find the discussion here:
http://ideas.repec.org/p/pra/mprapa/27348.html
-- See p. 14 (footnote 23) and p. 22

A general rule of thumb in economics is a VIF>10 indicates harmful collinearity. 
Hope you find this useful.

Syed Basher
Doha, Qatar.




----- Original Message ----
From: Aggie Chidlow <mojamalarybka@googlemail.com>
To: statalist@hsphsun2.harvard.edu
Sent: Sat, March 12, 2011 1:36:26 AM
Subject: Re: st: collin

Dear Charls and Syed,
Thank you very much for your comments and suggestions.

I would be thankful very much for your help Syed regarding how to interpret VIF professionaly. Any advice/references would be very much appreciated.

Many thanks,Aggie

On Thu, Mar 10, 2011 at 3:14 PM, Syed Basher <syed.basher@yahoo.com> wrote:
> Hi Aggie,
>
> I think diagnostic checking such as VIF comes before estimation, that 
> is we first check the extent of collinearity among variables using VIF 
> then decide which variables to include in the estimation. After 
> running VIF, you can do
two
> sets of estimation: one with all dummies (what the reviewer asked for) 
> and another with least collinear dummies (as you already did), this 
> way the difference between two results will show up. As Charles 
> mentioned, it is
better
> to follow what the reviewer has asked for. If you wanted to know how 
> to interpret VIF results professionally, let me know.
>
> Syed Basher
> Doha, Qatar
>
>
>
> ----- Original Message ----
> From: Aggie Chidlow <mojamalarybka@googlemail.com>
> To: statalist@hsphsun2.harvard.edu
> Sent: Thu, March 10, 2011 4:30:51 PM
> Subject: st: collin
>
> Dear Stata users,
>
> I was appreciate some help regarding "collin"
>
> I just got a paper back from a reviewer and he/she wants me to include 
> all my year dummies (i.e. y98 y99 y00 y01 y02 y03) in the following
> model: probit  y x1 x2 x3 lnx4  x5 y98 y99 y00 y01 y02
>
> Previusly in the model I only included two year dummies (i.e y99 and
> y01) as the others we omitted automatically due to collinearity.
> I mentioned that in the paper, however, he/she says it is 
> unsatisfactory and I should include them all and than comment on VIF.
>
> Please, can somebody tell me how I can go about this?
> Any advise and/or references will be more than appreciated.
>
> Many thanks in advance.
> Aggie
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