Illusions in Regression Analysis

Abstract

Soyer and Hogarth’s article, 'The Illusion of Predictability,' shows that diagnostic statistics that are commonly provided with regression analysis lead to confusion, reduced accuracy, and overconfidence. Even highly competent researchers are subject to these problems. This overview examines the Soyer-Hogarth findings in light of prior research on illusions associated with regression analysis. It also summarizes solutions that have been proposed over the past century. These solutions would enhance the value of regression analysis.

Keywords: a priori analysis, decision-making, ex ante testing, forecasting, non-experimental data, statistical significance, uncertainty