Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?
A)There exists homoskedasticity in the model.
B)The model can produce predicted probabilities that are less than zero and greater than one.
C)The model leads to the omitted variable bias as only two independent factors can be included in the model.
D)The model leads to an overestimation of the effect of independent variables on the dependent variable.

Question

Quizplus · Accepted Answer

Multiple linear regression models can produce predicted probabilities less than zero or greater than one when used for binary outcomes, which is inappropriate. This is because linear regression does not constrain predictions to the [0,1] interval.

Which of the Following Problems Can Arise in Policy Analysis