AN EXAMINATION OF THE CONFORMANCE OF BANK INTERNAL AUDITORS WITH INTERNAL AUDITING STANDARS Recall equation (3), which suggested that a naïve estimate of the peer effect is magnified by effectiveness sorting, with the degree of magnification being ( ) ( ) θ * ≡ cov x j ,μ j var x j , the coefficient from a regression of μ j on x j across all districts in the market. θ * = 1 in the perfectly sorted markets displayed in Panels A, B, C, and E of Figure , indicating that the slope of school-level average test scores with respect to student characteristics in.
