In the case of the simple regression model $Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } , i = 1 , \ldots , n$ when X and u are correlated, then
A) the OLS estimator is biased in small samples only.
B) OLS and TSLS produce the same estimate.
C) X is exogenous.
D) the OLS estimator is inconsistent.

Question

In the case of the simple regression model $Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } , i = 1 , \ldots , n$ when  X  and  u  are correlated, then
A) the OLS estimator is biased in small samples only.
B) OLS and TSLS produce the same estimate.
C)  X  is exogenous.
D) the OLS estimator is inconsistent.

Quizplus · Accepted Answer

The Answer is D

In the Case of the Simple Regression Model Yi=β0+β1Xi+ui,i=1,…,nY _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } , i = 1 , \ldots , nYi​=β0​+β1​Xi​+ui​,i=1,…,n

In the Case of the Simple Regression Model $Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } , i = 1 , \ldots , n$