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Wednesday, June 27, 2018

Lars P. Syll — The main reason why almost all econometric models are wrong

Since econometrics doesn’t content itself with only making optimal predictions, but also aspires to explain things in terms of causes and effects, econometricians need loads of assumptions — most important of these are additivity and linearity. Important, simply because if they are not true, your model is invalid and descriptively incorrect. And when the model is wrong — well, then it’s wrong....
Simplifying assumptions versus oversimplification.

Lars P. Syll’s Blog
The main reason why almost all econometric models are wrong
Lars P. Syll | Professor, Malmo University

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