Question

Which of the following statements is true. Select one:

a. The expected value of a discrete random variable is the outcome that is most likely to occur.

b. If the true model is Y = β1 + β2 X1 + β3 X2 + u, but you estimate Y = β1 + β2 X1 + u, your estimate of β2 will always be biased.

c. In an OLS regression, if we change the dependent variable from Earnings to log(Earnings), the R-squared does not change.

d. If all of the residuals from a simple linear regression line are exactly equal to zero, then the R2 will be equal to 1.

e. All of the above

Answer 1

e ) all of the above.

All the points mentioned above are true from a to d.

a. The expected value of a discrete random variable is the outcome that is most likely to occur. - true

b. If the true model is Y = β1 + β2 X1 + β3 X2 + u, but you estimate Y = β1 + β2 X1 + u, your estimate of β2 will always be biased. - true

c. In an OLS regression, if we change the dependent variable from Earnings to log(Earnings), the R-squared does not change. - true

d. If all of the residuals from a simple linear regression line are exactly equal to zero, then the R2 will be equal to 1. - true