Which of the following statements is true?
A)To carry out OLS estimation, it is necessary that the error terms should be correlated with the explanatory variables.
B)Measurement error and simultaneity are potential sources of endogeneity.
C)While entering data for a regression analysis, qualitative explanatory variables should be assigned numerical values.
D)AR models are best suited for ordered responses.

Question

Quizplus · Accepted Answer

Measurement error and simultaneity are common sources of endogeneity in regression models, which can lead to biased estimates and incorrect inferences. OLS estimation does not require the error terms to be correlated with the explanatory variables, as that is a different condition known as autocorrelation. Qualitative explanatory variables may be assigned numerical values, but they should be done so carefully to avoid misinterpretation. AR models can be used for various types of data, not just ordered responses.

Which of the Following Statements Is True