Thread Subject: Give me a Regression Problem

On Jul 17, 7:52=A0am, Greg Heath <he...@alumni.brown.edu> wrote:
> On Jul 16, 6:54=A0pm, baldrick <philbrier...@hotmail.com> wrote:
-----SNIP
> > There is also no reason why stongly correlated variables should not be
> > used together. Historically this is to do with the maths behind
> > finding the coefficients using certain techniques - inverting matrices
> > and so on.
>
> Inverting matrices for regression is passe.
> Although you may have to resort to pseudoinversion,
> keeping highly correlated pairs is acceptable.
>
> > Logically, I would rather have say, both income and bank
> > balance in my model even if they were highly correlated. How do I know
> > which one is the real driver of whatever is being predicted, and there
> > is no reason why they should stay correlated (banks know your balance,
> > but you could start lying about your income). =A0Having both in the
> > model is kind of hedging your bets against things going wrong (you
> > would want them to have similar importance though).
>
> Devil's Advocate:
>
> If you try to hedge your bet you may will notice, as quickly,
> when one of the quantities becomes unreliable.

=2E..may not notice ...

Hope this helps.

Greg