Measurement error in an independent variable presents a challenge because
A)the independent variable is not correlated with the dependent variable.
B)the OLS estimates are biased.
C)the OLS estimates are unbiased but no longer BLUE.
D)the independent variable is not correlated with the error term.

Question

Quizplus · Accepted Answer

Measurement error in an independent variable can lead to biased estimates in OLS regression, as it affects the accuracy of the estimates of the coefficients. This is because the measurement error in X will be captured in the residuals and thus confound the relationship between X and Y, leading to biased estimates for the slope and intercept.

Measurement Error in an Independent Variable Presents a Challenge Because