3
In most practical problems, the analyst has a rather large pool of
possible candidate regressors, of which only a few are likely to be
important.
•
Finding an appropriate
subset of regressors
for the model is often
called the
variable selection problem
.
•
Building a regression model that includes only a subset of the
available regressors involves two conflicting objectives.
1.
We would like the model to
include as many regressors
as
possible so that the information content in these factors
____________________
value of
y
.
2.
We want the model to include
as few regressors
as possible
because the
________________________________
as the number of
regressors increases.
•
Also the more regressors there are in a model, the greater the costs
of data collection and model maintenance.
The process of finding a model that is a compromise between these
two objectives is called selecting the "
best
" regression equation.
Consequences of Model Misspecification