u/symbolabmathsolver

Hi all,

I'm reviewing some basic econometric theory and I need help, please, in understanding the apparent tradeoff between adding more (informative) regressors to a model and thus reducing omitted variable bias vs those added regressors being correlated with one another, thereby increasing variance.

Say we run an 'auxiliary' regression among the regressors. E.g. if the original regression were wage = a + b1educ + b2exper + e, regress educ = a + b1exper to check the R^2 of this regression. If it is near zero, then experience is uninformative about education, so we're good. But if R^2_1 -> 1, we have the problem of 'near multicollinearity'. We can still invert X'X, and get a beta hat estimate, but this is problematic because multiple regression is trying to answer (say) "what is the effect of education on wages, holding all other regressors (e.g. exper) fixed." If educ and exper move together, we can't really separately identify the effects of educ / exper on wage.

This shows up by inflating the variance:

Var(b_j|X) = sigma^2 / (sum_i=1^n (x_ij - xbar)^2 * (1 - R^2_j)) where R^2_j is from the auxiliary regression, not the overall R^2. As R^2_j -> 1, Var(b_j|X) increases.

But usually in regressions we include many related things. Experience and education may be strongly related. Or say we add age in, then that may be related. It seems many regressors could be highly related.

Suppose two regressors are highly related, and both affect the dependent variable. Dropping one would lead to omitted variable bias. Keeping both would inflate the variance. It seems there is a tradeoff here, unless I am misunderstanding something. Please help me in understanding this better.

Thank you for your time and comments.

As in, air conditioned, if possible. Or at least shady and cool. The library is so hot. Rooms are hot. Anywhere that doesn’t make you sweat please.

For those who have received an offer for postgraduate taught study at LSE, has anyone been notified if they were accepted also to the LSE Excellence Scholarship? I gather that people are considered for the scholarship during the application phase, but it is unclear to me whether they would be awarded the scholarship with their letter of acceptance or afterwards, say in June/July when all offers have been made. (Since how could they judge whether someone should merit the award if not all applicants have been considered yet).

If anyone has already been awarded this scholarship, how did you find out, and when in relation to your being accepted to the MSc?

Thank you.

silly question, but I was just curious whether offer holders are putting “incoming student at LSE” or similar on LinkedIn headlines. I’ve seen some people do it and I don’t know it just seems a bit weird. like look at me, here I come! but I guess it’s a valid flex. Wondering what the general consensus is on signaling that, and whether it even has any advantages beyond flexing.

Hi all,

I am looking for a new gothic novel, and I would like your advice, please.

I have enjoyed very much the following:—

Frankenstein; Strange Case of Dr Jekyll and Mr Hyde; Dracula; Rebecca; Carmilla; The Picture of Dorian Gray; Wuthering Heights; The Woman in White; The Moonstone.

I am looking for a cozy novel to sink into. I especially like the Victorian, flowery prose. It's funny to read compared to modern English, but it's quite relaxing. I especially like the following features of these novels (which, I suppose, are in some way what characterize a 'gothic' novel)—wind-swept moors; dark, grey, foggy, rainy days; supernatural horror; castles, old mansions, and English country houses; narrative/epistolary style.

If possible, I don't want something too difficult. I was going to pick up Melmoth the Wanderer, but I really don't have the time or energy for such a difficult novel at present. Something relaxing and easy to sink into would be great.

Thank you as always. I look forward to hearing your recommendations, and later discussing them once I have read them.