On Sat, September 2, 2006 02:30, Allin Cottrell wrote:
Here's the question I'm working towards: Do you think
better off if we changed the behaviour of the "omit" command so
that it calculates and reports a test statistic -- possibly by
means of estimating the restricted model, depending on the
original estimator and relevant option switches -- but never
replaces the "current model" with a restricted model?
Thanks for the recap. Here's my take on this.
The "omit" command, IMO, should be considered mainly a testing tool; there are
two motivations for this: one is computational efficiency; the other is more
methodological. In my mind, the action of restricting an existing model (the
estimation technique is immaterial in this context) is composed of two
logically consecutive steps: FIRST you test if your restriction is at odds
with data, and IF NOT you want see what the restricted model looks like. In
other words, there is no use for a restricted model whose validity has already
been established as dubious.
Besides, in many cases we may want to perform a variable omission test hoping
that the null is rejected: this is exactly why you breathe that sigh of relief
when the t-statistic on your precious regressor that you really care about is
over 2. In those cases, you don't want to see the restricted model, you just
want to make sure regressors aren't redundant.
It so happens that the most widely used estimation tool in econometrics (ols)
lets you merge the two steps into one; in fact, when you do a variable
omission F-test the traditional way, you effectively reverse the order of the
two steps. This comes from the fact that, under ideal conditions (no missing
values in the dataset, homoskedasticity, no serial correlation etc.), the
actual calculations necessary for the two steps are practically the same.
However, I see this as a by-product of the particular way ols works; the
logical priority order stays unchanged.
So, my proposal is to reverse the logic of the omit command. By default, a
test statistic should be what you get; that said, it would be silly not to be
able to estimate the restricted model in one go. So, I wouldn't mind somehing
ols 1 0 2 3 4
omit 3 4 # just show the test statistic
omit 3 4 --new # estimate the restricted model and show you the test
Of course, "--new" stands for "estimate a new model in the process",
not a particularly transparent way to put it, but I couldn't think of anything
better at this moment; needless to say, a similar change would also involve
the "add", "addto" and "omitfrom" commands.
I do realise that this would be a rather drastic change, so I wouldn't tear my
hair out in despair if we kept things as they are now for backward
Riccardo "Jack" Lucchetti
Dipartimento di Economia
Facoltà di Economia "G. Fuà"