Suppose the Variable X2 Has Been Omitted from the Following

question 12

Multiple Choice

Suppose the variable x2 has been omitted from the following regression equation, is the estimator obtained when is omitted from the equation. The bias in is positive if _____.

• A) >0 and and are positively correlated
• B) <0 and and are positively correlated
• C) >0 and and are negatively correlated
• D) = 0 and and are negatively correlated

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Definitions:

Risky

Involves a high degree of uncertainty and potential for loss in relation to an investment or decision.

Average Return

The simple mathematical average of a series of returns generated over a period of time.

Standard Deviations

A statistical measure of the dispersion or variability in a data set, often used in finance to represent the volatility or risk of an investment.

Asset Classes

Categories of assets, such as stocks, bonds, real estate, and commodities, that exhibit different characteristics, behaviors, and risk profiles.