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From |
"Justina Fischer" <JAVFischer@gmx.de> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: How to reduce correlation between variables |

Date |
Tue, 07 Aug 2012 11:59:42 +0200 |

I completely agree with Nick. The only feasible technical solution I could think of is to assume different functional forms (based on some theory) - that is anlinear function in one variable but a log-function in the other. Economists would often assume a log-relation for the independent 'income', based on the theory of decreasing marginal returns to income. Justina -------- Original-Nachricht -------- > Datum: Tue, 7 Aug 2012 10:50:33 +0100 > Von: Nick Cox <njcoxstata@gmail.com> > An: statalist@hsphsun2.harvard.edu > Betreff: Re: st: How to reduce correlation between variables > 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 <maartenlbuis@gmail.com> > 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. > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ -- Justina AV Fischer, PhD COFIT Fellow World Trade Institute University of Bern homepage: http://www.justinaavfischer.de/ e-mail: javfischer@gmx.de. justina.fischer@wti.org papers: http://ideas.repec.org/e/pfi55.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: How to reduce correlation between variables***From:*Ebru Ozturk <ebru_0512@hotmail.com>

**Re: st: How to reduce correlation between variables***From:*Maarten Buis <maartenlbuis@gmail.com>

**RE: st: How to reduce correlation between variables***From:*Ebru Ozturk <ebru_0512@hotmail.com>

**Re: st: How to reduce correlation between variables***From:*Maarten Buis <maartenlbuis@gmail.com>

**RE: st: How to reduce correlation between variables***From:*Ebru Ozturk <ebru_0512@hotmail.com>

**Re: st: How to reduce correlation between variables***From:*Maarten Buis <maartenlbuis@gmail.com>

**Re: st: How to reduce correlation between variables***From:*Nick Cox <njcoxstata@gmail.com>

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