# Endogeneity

*Math & Statistics — Finicade finance glossary*

Endogeneity means a predictor is correlated with the error term, which breaks the causal interpretation of a regression coefficient. It arises three ways: an omitted confounder, reverse causality, or measurement error. Police numbers and crime rates illustrate the second — cities hire more police because crime is high, so a naive regression finds police cause crime. Identification strategies exist entirely to defeat it.

**Also known as:** endogenous variable, simultaneity bias, reverse causality

**Related terms:** [Instrumental Variable](https://finicade.com/glossary/instrumental-variable), [Omitted Variable Bias](https://finicade.com/glossary/omitted-variable-bias), [Correlation vs Causation](https://finicade.com/glossary/correlation-vs-causation), [Regression](https://finicade.com/glossary/regression), [Selection Bias](https://finicade.com/glossary/selection-bias)

Source: https://finicade.com/glossary/endogeneity