The Sampling Variance for the Instrumental Variables (IV) Estimator Is

question 19

Multiple Choice

The sampling variance for the instrumental variables (IV) estimator is larger than the variance for the ordinary least square estimators (OLS) because _____.

• A)R² > 1
• B)R² < 0
• C)R² = 1
• D)R² < 1

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Definitions:

Developing-Country

A developing country refers to a nation with a lower level of industrialization, lower living standards, and sometimes a lower Human Development Index (HDI) compared to developed countries.

Compounded Monthly

An interest calculation method where interest is added to the principal sum at the end of each month, with each subsequent month earning interest on the new total.

Nominal Rate

The nominal rate is the stated interest rate on a loan or financial product, not adjusted for inflation.

Monthly Compounding

The process wherein the interest earned on an investment is added to the principal sum every month, and from then on, the interest for future periods is calculated on the new total.