Dr. Jayanthi Sankaran
Well-Known Member
Hi David/Nicole,
Respectfully, I must add the following typos, that I want to bring to your attention (red to be replaced by R^2)
5.A. False, we cannot conclude the added variable is significant.
Stock & Watson (summary)
"There are four potential pitfalls to guard against when using the R^2 or adjusted R^2:
1. An increase in the or R^2 does not necessarily mean that an added variable is statistically significant.
2. A high or R^2 does not mean that the regressors are a true cause of the dependent variable.
3. A high or R^2 does not mean that there is no omitted variable bias.
4. A high or R^2 does not necessarily mean that you have the most appropriate set of regressors, nor does a low or R^2 necessarily mean that you have an inappropriate set of regressors".
Thanks!
Jayanthi
Respectfully, I must add the following typos, that I want to bring to your attention (red to be replaced by R^2)
5.A. False, we cannot conclude the added variable is significant.
Stock & Watson (summary)
"There are four potential pitfalls to guard against when using the R^2 or adjusted R^2:
1. An increase in the or R^2 does not necessarily mean that an added variable is statistically significant.
2. A high or R^2 does not mean that the regressors are a true cause of the dependent variable.
3. A high or R^2 does not mean that there is no omitted variable bias.
4. A high or R^2 does not necessarily mean that you have the most appropriate set of regressors, nor does a low or R^2 necessarily mean that you have an inappropriate set of regressors".
Thanks!
Jayanthi
Last edited:
