How to interpret and use regression analysis

23 Mar, 2018 at 19:06 | Posted in Statistics & Econometrics | Comments Off on How to interpret and use regression analysis

achenAfter having mastered all the technicalities of regression analysis and econometrics, students often feel as though they are the masters of the universe. I usually cool them down with a required reading of Christopher Achen’s modern classic — Interpreting and Using Regression.

It usually gets them back on track again, and they understand that

“no increase in methodological sophistication … alter the fundamental nature of the subject. It remains a wondrous mixture of rigorous theory, experienced judgment, and inspired guesswork. And that, finally, is its charm.”

And in case they get too excited about having learned to master the intricacies of proper significance tests and p-values, I ask them to also ponder on Achen’s warning:

Significance testing as a search for specification errors substitutes calculations for substantive thinking. Worse, it channels energy toward the hopeless search for functionally correct specifications and diverts​ attention from the real tasks, which are to formulate a manageable description of the data and to exclude competing ones.

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