[R] Error in lm() with very small (close to zero) regressor
RiGui
raluca.gui at business.uzh.ch
Sun Mar 29 21:53:46 CEST 2015
RiGui <raluca.gui <at> business.uzh.ch> writes:
>
[snip]
> I am terribly sorry for the code not being reproducible, is the
> first time I am posting here, I run the code several times before I
> posted, but...I forgot about the library used.
Thanks for updating.
> To answer to your questions:
>
>> How do you know this answer is "correct"?
> What I am doing is actually a "fixed effect" estimation. I apply a
> projection matrix to the data, both dependent and independent
> variables, projection which renders the regressors that do not vary,
> equal to basically zero - the x1 from the post.
> Once I apply the projection, I need to run OLS to get the estimates,
> so x1 should be zero.
Yes, but not *exactly* zero.
> Therefore, the results with the scaled regressor is not correct.
> Besides, I do not see why the bOLS is wrong, since is the formula of
> the OLS estimator from any Econometrics book.
" Because it's numerically unstable.
Unfortunately, you can't always translate formulas directly from
books into code and expect them to be reliable.
Based on Peter's comments, I believe that as expected lm()
is actually getting closer to the 'correct' answer.
"
Thank you to both of you for your comments! I will re-do the analysis
following your advice.
Best,
Raluca
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