Economics · Econometrics & OLS Assumptions
In a simple linear regression equation, if an explanatory variable is correlated with the disturbance term (i.e. endogeneity exists), the ordinary least squares (OLS) estimators are:
- 1Only biased
- 2Only inconsistent
- 3Both biased and inconsistent✓
- 4Neither biased nor inconsistent
Correct answer
Both biased and inconsistent
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