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Re: st: How to reduce correlation between variables


From   Nick Cox <[email protected]>
To   [email protected]
Subject   Re: st: How to reduce correlation between variables
Date   Tue, 7 Aug 2012 10:50:33 +0100

I agree with Maarten and Joseph. I note also that Ebru is referring to
correlation between variables as posing a problem but doesn't say what
that problem is. Personally I am more wary of a model being
unnecessarily complicated than of the bugaboo called
multicollinearity. If two or more predictors are highly correlated you
can use scientific judgement to choose which makes more sense or
choose according to which performs better as a predictor. Neither
strategy requires an extra command, but rather a willingness to think
about what you are doing rather than treating analysis as purely
mechanical.

Nick

On Mon, Aug 6, 2012 at 7:38 PM, Maarten Buis <[email protected]> wrote:
> On Mon, Aug 6, 2012 at 7:24 PM, Ebru Ozturk wrote:
>> They are still correlated. Sample size is 285 firms and I cannot increase it. Is there other way to sole this problem?
>
> The new variables created by -orthog- shouldn't be correlated. Can you
> show us the exact command you used (*) and the output for -corr- among
> the new variables created by -orthog-?
>
> -- Maarten
>
> (*) the command you gave us some time ago would have produced an
> error, so that cannot be the one.
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