Omitted Variable Bias Formula
Interpretation
The confounder crosses the null — the observed effect could be entirely spurious.
Key insight: We can never prove the absence of unmeasured confounders.
Sensitivity analysis asks: "How extreme would confounding need to be to change our conclusion?"
Try This
1. Set observed effect to −0.30 (exercise reduces heart disease risk)
2. Slowly increase γ and δ — how strong must the confounder be to erase the effect?
3. Notice: bias = γ × δ, so a moderate confounder on both dimensions creates more bias than a strong confounder on only one