From the course: Data, Economic Modeling, and Forecasting with Stata
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Correlation is not causation - Stata Tutorial
From the course: Data, Economic Modeling, and Forecasting with Stata
Correlation is not causation
- One of the most common sayings among economists and data analysts is that correlation is not causation. Correlation is when data looks like it moves together, but causation is when one data series helps you forecast another. For example, if I told you you could predict the winner of the World Cup by the number of meteor showers that happened in the year before, that would be something that has a correlation, but I don't think you'd be able to make a pretty good forecast using that data because there isn't a causation, there's not a causal relationship. The meteor shower doesn't cause a certain team to win the World Cup. However, if I told you that the winner of the World Cup was correlated to the performance of the members on each team in the 24 months before the World Cup, that would be something that's correlated, and I suspect there'd be a causal relationship there because naturally their recent performance…
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