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Introductory EconometricsIntuition, Proof, and Practice$
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Jeffrey Zax

Print publication date: 2011

Print ISBN-13: 9780804772624

Published to Stanford Scholarship Online: June 2013

DOI: 10.11126/stanford/9780804772624.001.0001

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More Than Two Explanatory Variables

More Than Two Explanatory Variables

Chapter:
(p.541) Chapter 14 More Than Two Explanatory Variables
Source:
Introductory Econometrics
Publisher:
Stanford University Press
DOI:10.11126/stanford/9780804772624.003.0014

This chapter shows that the addition of a second explanatory variable in Chapter 11 adds only four new things to what there is to know about regression. First, regression uses only the parts of each variable that are unrelated to all of the other variables. Second, omitting a variable from the sample relationship that appears in the population relationship almost surely biases our estimates. Third, including an irrelevant variable does not bias estimates but reduces their precision. Fourth, the number of interesting joint tests increases with the number of slopes. All four remain valid when we add additional explanatory variables.

Keywords:   regression analysis, explanatory variables, population relationship, biased estimates, slopes

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