Which of the following can cause specification bias in a regression model?
A)omission of variables uncorrelated to the independent variables
B)omission of variables correlated to the independent variables
C)inclusion of autocorrelated variables
D)inclusion of an error term

Question

Quizplus · Accepted Answer

Omitting variables that are correlated to the independent variables can lead to specification bias, as the model is not fully accounting for all relevant factors that may affect the dependent variable. Omitting uncorrelated variables does not necessarily lead to specification bias, as long as the relevant correlated variables are included. Inclusion of autocorrelated variables and an error term may cause other types of bias, but not specification bias.

Which of the Following Can Cause Specification Bias in a Regression