Which of the following are consequences of measurement error in the dependent variable? A) Smaller R² B) Biased coefficient estimates C) The bigger the measurement error, the bigger the variance of the error term. D) Both A and C

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Quizplus · Accepted Answer

Measurement error in the dependent variable typically leads to a smaller R-squared value, as it increases the unexplained variance in the model. Additionally, it increases the variance of the error term, as the measurement error contributes to the discrepancies between observed and predicted values. However, it does not necessarily lead to biased coefficient estimates; that issue is more directly associated with measurement error in the independent variables or omitted variable bias.

Which of the Following Are Consequences of Measurement Error in the Dependent