What you will learn
- Pretrends
- Placebo tests
- Sensitivity to omitted variables
- Measurement error
Pretrends
Pretrend checks examine whether groups behaved differently before a proposed treatment. They can reveal problems but cannot prove the unobserved post-event counterfactual. Low power in a short preperiod is also a limitation.
Placebo tests
Placebo tests apply the design to times or outcomes where the claimed effect should not appear under the theory. A failure can challenge the design; a pass is supportive evidence, not a universal guarantee.
Sensitivity to omitted variables
Sensitivity analysis asks how conclusions change under plausible omitted influences or alternative specifications. Choose variations for substantive reasons and report them rather than searching only for stable-looking results.
Measurement error
Measurement error can distort treatment, outcome and timing. Misrecorded event times may smear responses across windows. Audit data provenance before interpreting sophisticated estimates.
Worked example
A study finds a supposed effect before the treatment occurred. This may indicate anticipation, timing error or an invalid design. It cannot be ignored solely because the post-event estimate is attractive.
Try it yourself
Write an investigation plan for that pre-event effect with at least two competing explanations.
Show the worked solution
Check public information timing and anticipation, verify timestamps and assess whether the comparison groups or trends are appropriate. Report what the investigation supports and retain uncertainty where the alternatives cannot be separated.
Apply this to your course project
Draw a causal diagram and explain the identification limits of a proposed gold-market study.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.