How does the least squares estimator perform on a simultaneous equation model with an endogenous regressor?
A)unbiased and consistent in large samples
B)biased and inconsistent in all sample sizes
C)biased but consistent in large samples
D)unbiased but inconsistent unless collected through random sampling

Question

Quizplus · Accepted Answer

The least squares estimator is biased and inconsistent in all sample sizes when applied to a simultaneous equation model with an endogenous regressor, due to the endogeneity problem which causes the estimators to not converge to the true parameter values as the sample size increases.

How Does the Least Squares Estimator Perform on a Simultaneous