When collinear variables are included in an econometric model coefficient estimates are
A)biased downward and have smaller standard errors
B)biased upward and have larger standard errors
C)biased and the bias can be negative or positive
D)unbiased but have larger standard errors

Question

Quizplus · Accepted Answer

Collinearity does not bias the coefficient estimates, but it increases the standard errors, making estimates less precise.

When Collinear Variables Are Included in an Econometric Model Coefficient