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Which of the following problems will cause OLS estimates of β1 to be biased? Including an...

  1. Which of the following problems will cause OLS estimates of β1 to be biased?
    1. Including an irrelevant X5 variable
    2. Failing to include an independent variable that is not correlated with Y
    3. Failing to include an independent variable that is correlated with Y only
    4. Failing to include an independent variable that is correlated with Y and X1
    5. Not only does X cause Y, but Y causes X.
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Answer #1

Omitting an important variable i.e Failing to include an independent variable that is correlated with Y only will cause OLS estimates of \beta1 to be biased. Hence,option(C) is correct.

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