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Econometrics and decision making: Effects of presentation mode

Much of empirical economics involves regression analysis. However, does the presentation of results affect economists’ ability to make inferences for decision making purposes? In a survey, 257 academic economists were asked to make probabilistic inferences on the basis of the outputs of a regression analysis presented in a standard format. Questions concerned the distribution of the dependent variable conditional on known values of the independent variable. However, many respondents underestimated uncertainty by failing to take into account the standard deviation of the estimated residuals. The addition of graphs did not substantially improve inferences. On the other hand, when only graphs were provided (i.e., with no statistics), respondents were substantially more accurate. We discuss implications for improving practice in reporting results of regression analyses.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1204.

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Date of creation: Feb 2010
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Handle: RePEc:upf:upfgen:1204
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Baltagi, Badi H., 2007. "Worldwide Econometrics Rankings: 1989 2005," Econometric Theory, Cambridge University Press, vol. 23(05), pages 952-1012, October.
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  4. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
  5. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
  6. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
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