Several methodological issues which impact experimental design and physiological interpretations in EEG coherence studies are considered, including reference electrode and volume conduction contributions to erroneous coherence estimates. A new measure, 'reduced coherency', is introduced as the difference between measured coherency and the coherency expected from uncorrelated neocortical sources, based on simulations and analytic-statistical studies with a volume conductor model. The concept of reduced coherency is shown to be in semi-quantitative agreement with experimental EEG data. The impact of volume conduction on statistical confidence intervals for coherence estimates is discussed. Conventional reference, average reference, bipolar, Laplacian, and cortical image coherencies are shown to be partly independent measures of neocortical dynamic function at different spatial scales, due to each method's unique spatial filtering of intracranial source activity.