Omitted variable意思

"Omitted variable" is a term used in statistics and econometrics, particularly in the context of linear regression analysis. It refers to a situation where an explanatory variable that should be included in the model is not included, leading to potentially biased estimates of the coefficients of the other variables in the model.

In a regression model, each explanatory variable is supposed to represent the effect of a certain factor on the dependent variable. If an important factor is not included as an explanatory variable, the model may not capture all the relevant relationships, and the coefficients of the other variables may be biased as a result.

For example, if you are trying to predict the price of a house using variables such as square footage, number of bedrooms, and neighborhood, but you omit the variable "age of the house," your model may not accurately predict the price, and the coefficients for the other variables may be biased.

Omitted variable bias can lead to incorrect inferences and decisions based on the analysis, so it is important to include all relevant variables in the model to ensure that the estimates are as accurate as possible.