Multicollinearity in cross-sectional regressions |
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Authors: | Jørgen Lauridsen Jesùs Mur |
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Institution: | (1) Department of Business and Economics, University of Southern Denmark, Campusvej 55, 5230 Odense M, Denmark;(2) Department of Economic Analysis, University of Zaragoza, Zaragoza, Spain |
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Abstract: | The paper examines robustness of results from cross-sectional regression paying attention to the impact of multicollinearity. It is well known that the reliability of estimators (least-squares or maximum-likelihood) gets worse as the linear relationships between the regressors become more acute. We resolve the discussion in a spatial context, looking closely into the behaviour shown, under several unfavourable conditions, by the most outstanding misspecification tests when collinear variables are added to the regression. A Monte Carlo simulation is performed. The conclusions point to the fact that these statistics react in different ways to the problems posed. |
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Keywords: | Multicollinearity Cross-sectional regression Spatial dependency Misspecification tests |
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