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.

---

Definitions:

Amazon River

One of the largest rivers in the world by discharge volume of water, located in South America and playing a crucial role in the Amazon rainforest ecosystem.

Mexico

A country located in the southern part of North America, known for its rich cultural heritage, history, and diverse landscapes.

Luxury Goods

High-end products or services that are not essential but are desired for their quality, status, or aesthetic appeal.

European Exploration

The period during which European powers explored, and sometimes conquered, parts of Africa, the Americas, Asia, and Oceania from the late 15th century onwards.