Suppose We Omit X₂ from the Following in a Bivariate $\beta$

question 14

Multiple Choice

Suppose we omit X₂ from the following in a bivariate model
Y_i = $\beta$ ₀ + $\beta$ ₁X_1i + $\varepsilon$ _i
And suppose X₂ is positively related to X₁ and $\beta$ ₂ is positive, while $\beta$ ₁ is negative. What is the likely effect of omitting X₂ on our estimate of $\beta$ ₁?

• A) No effect; \(\beta\)₁ hat will be unbiased.
• B) \(\beta\)₁ hat will be more negative than it should be.
• C) \(\beta\)₁ hat will be less negative than it should be.
• D) \(\beta\)₁ hat will be biased toward zero.

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