Which of the following will cause Ordinary Least Square (OLS) estimates of a simple regression model, y = + x + u to be biased?
A)Every individual in the population has the same probability of being observed in the sample.
B)The observed values of span a wide range.
C)The constant, is greater than the coefficient, .
D)The constant, is greater than the coefficient, x .

Question

Which of the following will cause Ordinary Least Square (OLS) estimates of a simple regression model, y =  +  x + u to be biased?
A)Every individual in the population has the same probability of being observed in the sample. 
B)The observed values of span a wide range. 
C)The constant, is greater than the coefficient, . 
D)The constant, is greater than the coefficient, x .

Quizplus · Accepted Answer

If the constant term (intercept) is greater than the coefficient of the independent variable (slope), the OLS estimates will be biased. This is because the slope estimates the change in y for a one-unit increase in x, but if the intercept is large, the starting point for the regression line will be higher than it should be, causing the estimates to be biased.

Which of the Following Will Cause Ordinary Least Square (OLS)