Estimating Probability

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Otto
Posts: 4
Joined: Fri Oct 02, 2015 2:14 pm

Estimating Probability

Postby Otto » Thu Jun 29, 2017 11:58 am

Hi
I am estimating a model Y=a1x1+a2x2+a3x3+error term
Y is a probability : 0≤Y≤1
And i'm using OLS
The problem is that, any model that I get, after forecasting, I get negative numbers for Y

Some students suggested to use a transformation for Y that is :
Z=log[Y/(1-Y)]
I estimate the model, predict Z, then extract Y.

1/ Is it a correct/good idea ?

2/ Any other suggestion ?

Regards

startz
Non-normality and collinearity are NOT problems!
Posts: 3178
Joined: Wed Sep 17, 2008 2:25 pm

Re: Estimating Probability

Postby startz » Thu Jun 29, 2017 1:39 pm

That's a pretty standard approach.


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