Suppose the variable x₂ has been omitted from the following regression equation, . is the estimator obtained when x₂ is omitted from the equation.If E( )β₁, is said to _____. A)have an upward bias B)have a downward bias C)be unbiased D)be biased toward zero

Question

Suppose the variable x₂ has been omitted from the following regression equation, . is the estimator obtained when x₂ is omitted from the equation.If E( )>β₁, is said to _____. A)have an upward bias B)have a downward bias C)be unbiased D)be biased toward zero

Quizplus · Accepted Answer

If the omitted variable is positively correlated with the dependent variable and not included in the model, the estimated coefficient of the included variables will be biased upwards, resulting in an upward bias.

Suppose the Variable X2 Has Been Omitted from the Following

Suppose the Variable X₂ Has Been Omitted from the Following