Endogeneity of an independent variable occurs when
A)an independent variable is correlated with the dependent variable.
B)an independent variable is correlated with the error term.
C)the dependent variable is correlated with the error term.
D)the dependent variable is correlated with an independent variable.

Question

Quizplus · Accepted Answer

Endogeneity of an independent variable occurs when the independent variable is correlated with the error term. This can lead to biased and inconsistent estimates of the coefficient of the independent variable. The other options (A, C, D) describe forms of correlation between variables, but do not necessarily imply endogeneity.

Endogeneity of an Independent Variable Occurs When