Suppose the variable x₂ has been omitted from the following regression equation, . is the estimator obtained when x₂ is omitted from the equation.The bias in is negative if _____. A) 0 and x₁ and x₂are positively correlated B)

Question

Suppose the variable x₂ has been omitted from the following regression equation, . is the estimator obtained when x₂ is omitted from the equation.The bias in is negative if _____. A) >0 and x₁ and x₂are positively correlated B) <0 and x₁ and x₂are positively correlated C) =0 and x₁ and x₂are negatively correlated D) =0 and x₁ and x₂are negatively correlated

Quizplus · Accepted Answer

When a variable is omitted from a regression equation, the estimator obtained is biased if the omitted variable is correlated with the included variables. In this case, the bias will be negative if the true coefficient of the omitted variable is negative and the omitted variable is positively correlated with the included variables. Therefore, option B is the best choice as it states that the bias is negative (11eab0c9_90f9_17af_8f52_f500e052a673_TB2132_11 < 0) and x₁ and x₂ are positively correlated.

Suppose the Variable X2 Has Been Omitted from the Following

Suppose the Variable X₂ Has Been Omitted from the Following