You try to explain the number of IBM shares traded in the stock market per day in 2005. As an independent variable you choose the closing price of the share. This is an example of
A)simultaneous causality.
B)invalid inference due to a small sample size.
C)sample selection bias since you should analyze more than one stock.
D)a situation where homoskedasticity-only standard errors should be used since you only analyze one company.

Question

Quizplus · Accepted Answer

Choosing the closing price of the share as an independent variable to explain the number of IBM shares traded in the stock market per day in 2005 suggests simultaneous causality, meaning the two variables are likely affecting each other. It is possible that the number of shares traded is causing changes in the stock price, and vice versa. Therefore, this is an example of simultaneous causality.

You Try to Explain the Number of IBM Shares Traded