Tag Archives: omitted variable bias

Omitted Variable Bias

The omitted variable bias is a common and serious problem in regression analysis. Generally, the problem arises if one does not consider all relevant variables in a regression. In this case, one violates the third assumption of the assumption of … Continue reading

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Omitted Variable Bias: What can we do about it?

To deal with an omitted variables bias is not easy. However, one can try several things. First, one can try,

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Omitted Variable Bias: Violation of CLRM–Assumption 3: Explanatory Variables must be exogenous

One reason why the omitted variable leads to biased estimates is that omitting a relevant variable violates assumption 3 of the necessary assumptions of the classical regression model that states that all explanatory variables must be exogenous, i.e. From this … Continue reading

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Omitted Variable Bias: Conclusion

The following post provides a recap of the previous posts on the omitted variable bias (Introduction, Explanation, In-depth discussion of the bias, Consequences of the omitted variable bias) and concludes with some general advise. In case you haven’t read the … Continue reading

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Omitted Variable Bias: Consequences

In this post, we will discuss the consequence of the omitted variable bias in a more elaborate way. Particularly, we will show that omitting a variable form the regression model violates an OLS assumption and discuss what will happen if … Continue reading

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Omitted Variable Bias: Explaining the Bias

In the previous two posts on the Omitted Variable Bias (Post 1 and Post 2), we discussed the hypothetical case of finding out what determines the price of a car. In the hypothetical example, we assumed, for simplicity, that the … Continue reading

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Omitted Variable Bias: Understanding the Bias

The second part of the series on the Omitted Variable Bias intends to increase the readers understanding of the bias. Let’s continue with the example from the Introduction. Let the dependent variable be the price of a car and the … Continue reading

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