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Re: st: time series analysis ommited variables bias/specification error testing
From
Robert A Yaffee <[email protected]>
To
[email protected]
Subject
Re: st: time series analysis ommited variables bias/specification error testing
Date
Sat, 14 May 2011 17:06:11 -0400
Muhammad,
As for the bias introduced by the omitted variable, you would have
to figure out what that variable is to see how the estimation is
undermined by it.
The direction of bias will depend on the correlation of the
explanatory variable with the missing variable. However, if your
specification stems from incorrect functional form, you would want
to run a sensitivity analysis using the missing interaction or power
to determine the significance, direction, and magnitude of the bias.
Regards,
Robert
Robert A. Yaffee, Ph.D.
Research Professor
Silver School of Social Work
New York University
Biosketch: http://homepages.nyu.edu/~ray1/Biosketch2009.pdf
CV: http://homepages.nyu.edu/~ray1/vita.pdf
----- Original Message -----
From: Muhammad Anees <[email protected]>
Date: Saturday, May 14, 2011 3:07 am
Subject: st: time series analysis ommited variables bias/specification error testing
To: [email protected]
> Hi
>
> I am just wondering if my question is too basic although my confusion
> seems as legitimate to me.
> I have to check if my time series model y=ao+b1x1+b2x2+b3x3+b4x4+error
> has or has not an omitted variable bias or specification error against
> the three alternative
>
> (1) y=ao+b1x1+b2x1^2+b3x2+b4x3+b5x4+error
> (2) y=ao+b1x1+b2x2+b3x3+b4x4+b5x5+error
> (3) y=ao+b1x1+b2x1^2+b3x2+b4x3+b5x4+b6x5error
>
> What econometric tests Stata can offer and what can be the possible
> interpretation the testing procedure, even though the interpretation
> will depends on the testing technique? Now if if I have used the first
> model and have tested for cointegation and granger causality, what
> implication the has been the result of ommiting variables or
> specifying incorrect model.
>
> Thanks in advance for your time and suggestions?
>
>
> ---
> Best,
>
>
> ---------------
> Anees
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