Suppose the variable has been omitted from the following regression equation, is the estimator obtained when is omitted from the equation. If is said to _____.
A)have an upward bias
B)have a downward bias
C)be unbiased
D)be biased toward zero

Question

Suppose the variable  has been omitted from the following regression equation,   is the estimator obtained when  is omitted from the equation. If  is said to _____.
A)have an upward bias 
B)have a downward bias 
C)be unbiased 
D)be biased toward zero

Quizplus · Accepted Answer

The given regression equation is incomplete and it is not clear which variable is omitted from the equation. However, the fact that the estimator obtained by omitting a variable is mentioned suggests that the omitted variable bias (OVB) may be present. OVB occurs when a relevant variable is omitted from a regression equation, leading to biased and inconsistent estimators for other coefficients in the equation. The direction of bias depends on the correlation between the omitted variable and other variables in the equation. OVB is said to have an upward bias when the omitted variable is positively correlated with the dependent variable and at least one of the included independent variables. Therefore, given the lack of information, we can only infer that the variable 11eb6b8a_02cb_edfe_bf83_397d9a56b27c_TB8272_11 is missing and that its omission is likely to create an upward bias.

Suppose the Variable Has Been Omitted from the Following