  The ETS has recently released new estimates of validities of the GRE for
predicting cumulative graduate GPA. They average in the middle thirties - twice
as high as those previously reported by a number of independent investigators.
It is shown in the first part of this paper that this unexpected finding can be
traced to a flawed methodology that tends to inflate multiple correlation
estimates, especially those of populations values near zero. Secondly, the
issue of upward corrections of validity estimates for restriction of range is
taken up. It is shown that they depend on assumptions that are rarely met by
the data. Finally, it is argued more generally that conventional test theory,
which is couched in terms of correlations and variances, is not only
unnecessarily abstract but, more importantly, incomplete, since the practical
utility of a test does not only depend on its validity, but also on base-rates
and admission quotas. A more direct and conclusive method for gauging the
utility of a test involves misclassification rates, and entirely dispenses with
questionable assumptions and post-hoc "corrections". On applying this approach
to the GRE, it emerges (1) that the GRE discriminates against ethnic and
economic minorities, and (2) that it often produces more erroneous decisions
than a purely random admissions policy would.
