Omitted-variable bias

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Omitted-variable bias is the bias that appears in an estimate of a parameter if a regression run does not have the appropriate form and data for other parameters.

[edit] Omitted-variable bias in simple regression

Two cases must hold true for omitted variable bias to exist in a simple regression:

• the single independent variable is correlated with the omitted variable; and
• the omitted variable is a determinant of the dependent variable.

[edit] Omitted-variable bias in multiple regression

Two cases must hold true for omitted variable bias to exist in multiple regression:

• the omitted variable must be a determinant of the dependent variable; and
• the omitted variable must be correlated with at least one of the included independent variables.