Correction for Attenuation A correlation needs to be divided by the square root of the product of the two variables' reliability to determine what the correlation between the two variables would be if the variables' reliabilities were perfect. If a causal variable has measurement error, the estimate of its effect is biased, as well as the effects of other variables in the structural equation. Measurement error in the effect variable does not bias its coefficient unless the variables are standardized. In this case the bias is that the true beta equal the measured beta divided by the square root of the endogenous variable's reliability. Variables X and Z are correlated.
X affects the endogenous variable .
These three factors multiply to produce bias and so if any one is missing, there is no bias. Go to the next page. Go to the SEM page.