What factor is associated with lower bias in a model with a lagged dependent variable and fixed effects?
A) Large number of observations for each period.
B) Large number of time periods.
C) A large coefficient on the lagged dependent variable.
D) Using multiple lags (e.g., the dependent variable from the previous period and the period before that).

Question

Quizplus · Accepted Answer

A large number of time periods helps to reduce bias in models with lagged dependent variables and fixed effects because it allows the model to better capture the dynamics over time, reducing the impact of omitted variable bias by providing more variation to estimate the effect of the lagged dependent variable accurately.

What Factor Is Associated with Lower Bias in a Model