Suppose you are interested in estimating the effect of milage (milage) of the price of used...

    

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Suppose you are interested in estimating the effect of milage (milage) of the price of used cars (price). Price = beta_0+ beta_1 milage + u (i) (ii) (iii) Suggest a possible omitted variable. What is the correlation between the regressor and the omitted variable? [0.5 marks] What is the likely sign of the effect of the omitted variable and the dependent variable? [0.5 marks] Speculate as to whether the OLS estimator of the slope coefficient will be upward or downward biased due to this omitted variable. Make sure to justify your assessment. [0.5 marks] Suppose you are interested in estimating the effect of milage (milage) of the price of used cars (price). Price = beta_0+ beta_1 milage + u (i) (ii) (iii) Suggest a possible omitted variable. What is the correlation between the regressor and the omitted variable? [0.5 marks] What is the likely sign of the effect of the omitted variable and the dependent variable? [0.5 marks] Speculate as to whether the OLS estimator of the slope coefficient will be upward or downward biased due to this omitted variable. Make sure to justify your assessment. [0.5 marks]

Answer rating: 100% (QA)

i A possible omitted variable in this case could be the age of the used cars Age is often a relevant ... View the full answer