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The Empirical Trap of Sign Reversals with Equality Restrictions

Author

Listed:
  • Stephen E. Haynes

    (Department of Economics, University of Oregon)

Abstract

This note explores the insidious empirical trap posed by two common equality restrictions in regression analysis. The trap is that restricted coefficients can lie outside the interval of unrestricted coefficients and even reverse sign when negatively correlated regressors are added to one another or when positively correlated regressors are subtracted from one another.

Suggested Citation

  • Stephen E. Haynes, 2005. "The Empirical Trap of Sign Reversals with Equality Restrictions," University of Oregon Economics Department Working Papers 2005-8, University of Oregon Economics Department.
    • Handle: RePEc:ore:uoecwp:2005-8
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    File URL: http://economics.uoregon.edu/papers/UO-2005-8_Haynes_Reversals.pdf
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    More about this item

    Keywords

    Equality restrictions; Sign reversals; Invalid restrictions;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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