Arbeitspapier
On standard-error-decreasing complementarity: Why collinearity is not the whole story
There is a widespread belief among economists that adding additional variables to a regression model causes higher standard errors. This note shows that, in general, this belief is unfounded and that the impact of adding variables on coefficients' standard errors is unclear. The concept of standard-error-decreasing complementarity is introduced, which works against the collinearityinduced increase in standard errors. How standard-error-decreasing complementarity works is illustrated with the help of a nontechnical heuristic, and, using an example based on artificial data, it is shown that the outcome of popular econometric approaches can be potentially misleading.
- Language
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Englisch
- Bibliographic citation
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Series: MAGKS Joint Discussion Paper Series in Economics ; No. 03-2017
- Classification
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Wirtschaft
- Subject
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standard-error-decreasing complementarity
multivariate regression model
standard error
econometric methodology
multicollinearity
collinearity
- Event
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Geistige Schöpfung
- (who)
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Hayo, Bernd
- Event
-
Veröffentlichung
- (who)
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Philipps-University Marburg, School of Business and Economics
- (where)
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Marburg
- (when)
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2017
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hayo, Bernd
- Philipps-University Marburg, School of Business and Economics
Time of origin
- 2017
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