The Phantom Menace of Omitted Variables – A Comment

Nolan Ritter and Colin Vance

No 282, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This note demonstrates that in applied regression analysis, the variance of a coefficient of interest may decrease from the inclusion of a control variable, contrasting with Clarke's assertion (2005, 2009) that the variance can only increase or stay the same. Practitioners may thus be well-advised to include a relevant control variable on this basis alone, particularly when it is weakly correlated with the variable of interest.

Keywords: Control variables; variance; model specification; Control variables; variance; model specification (search for similar items in EconPapers)
JEL-codes: C12 C15 C18 (search for similar items in EconPapers)
Date: 2011
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Journal Article: The Phantom Menace of Omitted Variables. A Comment (2012)
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