If you had a two regressor regression model, then omitting one variable which is relevant
A)will have no effect on the coefficient of the included variable if the correlation between the excluded and the included variable is negative.
B)will always bias the coefficient of the included variable upwards.
C)can result in a negative value for the coefficient of the included variable, even though the coefficient will have a significant positive effect on Y if the omitted variable were included.
D)makes the sum of the product between the included variable and the residuals different from 0.

Question

Quizplus · Accepted Answer

Omitting a relevant variable can result in a biased and inconsistent estimate of the coefficient of the included variable, leading to a negative value even though its true effect on Y is positive. This is known as omitted variable bias. The correlation between the included and excluded variable does not necessarily affect the bias. The sum of the product between the included variable and the residuals will still be zero, regardless of whether the omitted variable is relevant or not.

If You Had a Two Regressor Regression Model, Then Omitting