Suppose the variable has been omitted from the following regression equation, is the estimator obtained when is omitted from the equation. The bias in is negative if _____. A) 0 and and are positively correlated B)

Question

Suppose the variable  has been omitted from the following regression equation,   is the estimator obtained when  is omitted from the equation. The bias in  is negative if _____.
A) >0 and and are positively correlated 
B) <0 and and are positively correlated 
C) =0 and and are negatively correlated 
D) =0 and and are negatively correlated

Quizplus · Accepted Answer

The omitted variable bias in a regression estimated by OLS is negative if the omitted variable is positively correlated with the independent variable(s) and the dependent variable. In this case, we know that the variable 11eab06d_2521_fee2_beed_b13485bfcc45_TB2133_11 has been omitted from the regression equation. The bias in 11eab06d_2522_4d06_beed_c1db29a3ac48_TB2133_11 is negative if 11eab06d_2522_c23a_beed_b73ed7910e2a_TB2133_11 < 0 and 11eab06d_2522_c23b_beed_714446ebd561_TB2133_11 and 11eab06d_2522_c23c_beed_333c80244f48_TB2133_11 are positively correlated. Therefore, the answer is B. When the variable x₂ is omitted from the regression, the bias in 11eab06d_2523_8593_beed_df78e9c15baa_TB2133_11 is negative if 11eab06d_2523_aca4_beed_3711f86393b0_TB2133_11 <0 and 11eab06d_2523_aca5_beed_41d46c260aaf_TB2133_11 and 11eab06d_2523_d3b6_beed_f51bbed605a7_TB2133_11 are positively correlated.

Suppose the Variable Has Been Omitted from the Following