IDEAS home Printed from https://ideas.repec.org/p/ems/eureri/177.html
   My bibliography  Save this paper

Estimated Parameters Do Not Get the "Wrong Sign" Due To Collinearity Across Included Variables

Author

Listed:
  • Franses, Ph.H.B.F.
  • Heij, C.

Abstract

Estimation results in linear regression models are sometimes in contrast with what was expected on the basis of a certain set of hypotheses or theory, in the sense that one or more parameters have the "wrong sign". One could be inclined to think that this is due to collinearity across explanatory variables, suggesting one should leave out one or more of the collinear variables. In this note we show that this is not a valid approach. Additionally, we show that "wrong signs" can occur because of correlations between included and omitted variables, so that "wrong signs" may occur if the model is not correctly specified. That is, if we find 'wrong signs" we should start questioning our model choice, not the data.

Suggested Citation

  • Franses, Ph.H.B.F. & Heij, C., 2002. "Estimated Parameters Do Not Get the "Wrong Sign" Due To Collinearity Across Included Variables," ERIM Report Series Research in Management ERS-2002-31-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:177
    as

    Download full text from publisher

    File URL: https://repub.eur.nl/pub/177/erimrs20020306145935.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    collinearity; misspecification; parameter estimation;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ems:eureri:177. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RePub (email available below). General contact details of provider: https://edirc.repec.org/data/erimanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.