If the measurement error is in the independent variable, then
A) We don't need to worry about bias, the measurement error will be reflected in the error term.
B) The bigger the measurement error, the bigger the variance of the error term.
C) We will have a case of attenuation bias, where the coefficient will be closer to 0 than it should be.
D) We will have a case of attenuation bias, where the coefficient is larger than it should be.

Question

Quizplus · Accepted Answer

When there is measurement error in the independent variable, it will lead to a weaker relationship between the independent and dependent variables, and the coefficient estimate will be closer to 0 than it should be. This is known as attenuation bias.

If the Measurement Error Is in the Independent Variable, Then