When selecting explanatory variables to include in a regression, A)you should pick all observable variables available. B)you should pick all observable variables that are likely to have a meaningful impact on the dependent variable. C)ignore all variables that have t-statistics less than the critical value. D)ignore variables that have an R² less than 1.

Question

Quizplus · Accepted Answer

Choosing all observable variables available may result in overfitting the model and including irrelevant variables. It is important to carefully consider which variables are likely to have a meaningful impact on the dependent variable based on theory and prior research. Ignore variables based on t-statistics or a specific cut-off is not recommended as it may lead to excluding important variables.

When Selecting Explanatory Variables to Include in a Regression