Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111746
Authors: 
De Luca, Giuseppe
Magnus, Jan
Peracchi, Franco
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-061/III
Abstract: 
This paper studies what happens when we move from a short regression to a long regression (or vice versa), when the long regression is shorter than the data-generation process. In the special case where the long regression equals the data-generation process, the least-squares estimators have smaller bias (in fact zero bias) but larger variances in the long regression than in the short regression. But if the long regression is also misspecified, the bias may not be smaller. We provide bias and mean squared error comparisons and study the dependence of the differences on the misspecification parameter.
Subjects: 
Omitted variables
Misspecification
Least-squares estimators
Bias
Mean squared error
JEL: 
C13
C51
C52
Document Type: 
Working Paper

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