Consider the linear regression model y = β0 + β1x + u, where the regressor x may be correlated with the error term u. A poor instrumental variable for the regressor x would be one that a. predicts x. b. is not entirely related to x. c. predicts y after x is controlled for. d. None of the listed answers is correct. e. is uncorrelated with u.

Consider the linear regression model y = β0 + β1x + u, where the regressor x may be correlated with the error term u. A poor instrumental variable for the regressor x would be one that a. predicts x. b. is not entirely related to x. c. predicts y after x is controlled for. d. None of the listed answers is correct. e. is uncorrelated with u.

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Question

Consider the linear regression model y = β0 + β1x + u, where the regressor x may be correlated with the error term u. A poor instrumental variable for the regressor x would be one that

a. predicts x.

b. is not entirely related to x.

c. predicts y after x is controlled for.

d. None of the listed answers is correct.

e. is uncorrelated with u.

Definition Definition Relationship between two independent variables. A correlation tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.

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