If you had to either include an irrelevant variable or omit a relevant variable,you would prefer
A)including an irrelevant variable over omitting a relevant variable because omitting a relevant variable leads to biased estimates.
B)including an irrelevant variable over omitting a relevant variable because omitting a relevant variable leads to the standard errors to increase.
C)omitting a relevant variable over including an irrelevant variable because omitting a variable does not affect the estimated coefficients.
D)omitting a relevant variable over including an irrelevant variable because including an irrelevant variable does not lead to biased estimates.

Question

Quizplus · Accepted Answer

Including an irrelevant variable in a regression model may lead to inefficiency in the estimates, but omitting a relevant variable can cause omitted variable bias, which is a more serious issue as it leads to biased and inconsistent estimates of the coefficients of the included variables.

If You Had to Either Include an Irrelevant Variable or Omit