The multinomial logit is preferable to OLS in the case of categorical dependent variables because it
A)is constrained to be non-negative.
B)accounts for the categorical nature of the independent variables.
C)accounts for the categorical nature of the dependent variable.
D)unbiased.

Question

Quizplus · Accepted Answer

The multinomial logit is preferable to OLS in the case of categorical dependent variables because it accounts for the categorical nature of the dependent variable. OLS assumes a continuous dependent variable and may lead to biased results when used with categorical dependent variables. Choice A is incorrect because the non-negativity constraint is not a unique feature of multinomial logit. Choice B is incorrect because accounting for the categorical nature of the independent variables is not a unique feature of multinomial logit. Choice D is incorrect because while multinomial logit may be unbiased, this is not a unique feature and does not explain why it is preferred over OLS for categorical dependent variables.

The Multinomial Logit Is Preferable to OLS in the Case