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Re: st: Multicollinearity in a fixed effects model

From   Maarten Buis <>
Subject   Re: st: Multicollinearity in a fixed effects model
Date   Wed, 8 Aug 2012 09:37:52 +0200

On Wed, Aug 8, 2012 at 7:32 AM, Fitzgerald, James wrote:
> My question is, can I "ignore" the effects of multicollinearity given my sample size and the fact that no variables are dropped?

Multicollinearity is not a problem, it is just the phenomenon that you
loose statistical power when two or more
explanatory/right-hand-side/independent/x variables are hard to
distinguish from one another. This is trivially so, and there is
nothing you need to do as statistical techniques tend to do the right
thing automatically; that is, the standard error will correctly
increase as the degree of multicollinearity increases. So there is
nothing to check.

-- Maarten

Maarten L. Buis
Reichpietschufer 50
10785 Berlin
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