Wednesday 29 December 2010

Reading 11, 3.8 Limitations of Regression Analysis

Level 2, Quantitative Methods, Reading 11

Short & Sweet!

The following limitations are important:

  • Parameter Instability - Regression relations can change over time, just as correlations can.
  • Public knowledge of regression relationships may negate their future usefulness.
  • If the regression assumptions listed in Section 3.2 are violated, hypothesis tests and predictions based on linear regression will not be valid.

That then, is Reading 11!

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