Why Should We Not Include Irrelevant Variables in Our Regression

question 1

Multiple Choice

Why should we not include irrelevant variables in our regression analysis?

• A) Your R-squared will become too high
• B) Because of data limitations
• C) It is bad academic fashion not to base your variables on sound theory
• D) We increase the risk of producing false significant results

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Definitions:

Social Dumping

Practice where companies move production to countries with lower labor standards and wages, undermining workers' rights and conditions.

Domestic Producers

Companies that manufacture or produce goods and services within a country's borders.

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale, affecting economies, cultures, and politics.

Financialization

The growing significance of financial sectors, financial motivations, financial organizations, and financial leaders in managing the economy and its regulatory bodies.