3. Econometrics

Specification Issues — Quiz

Test your understanding of specification issues with 5 practice questions.

Practice Questions

Question 1

What is a typical effect of including an irrelevant regressor on the precision of OLS coefficient estimates?

Question 2

To test whether adding a quadratic term $X^2$ significantly improves model fit over a linear specification, which statistical procedure should be used?

Question 3

Simultaneous equations bias arises in OLS estimation because:

Question 4

Which of the following is NOT a source of endogeneity in OLS regression?

Question 5

A valid instrumental variable $Z$ for an endogenous regressor $X$ must satisfy which two conditions?