Which of the Following Is a Drawback of Including Proxy

question 12

Multiple Choice

Which of the following is a drawback of including proxy variables in a regression model?

• A)It leads to misspecification analysis.
• B)It reduces the error variance.
• C)It increases the error variance.
• D)It exacerbates multicollinearity.

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Definitions:

Specialization

involves focusing on a narrow range of products or services to gain efficiency and improve competitive advantage.

Exchange

The act of giving one item in return for another, often seen in finance and trade as the swapping of goods, services, or financial instruments.

Trade

The exchange of goods, services, or both between two or more parties, either across international borders or within a single market.

Value

The importance, worth, or usefulness of something, often in economic terms as perceived by the consumer.