TOPIC 2: UNOBSERVED HETEROGENEITY BIAS

1. 1. Unobserved __________ factor is an important concept in panel data.

2. 2. When there is a _________ between the error terms and the regressors, CLRM assumption no longer hold.

3. 3. The estimated relationship between regressors and dependent variable will be _______ if the regressors are correlated with error terms.

4. 4. Endogenous regressors are a situation when the regressors suffer from a number of issues like reverse causation and measurement error in the explanatory variables.

• TRUE

• FALSE

5. 5. Ordinary Least Square (OLS) regressions will be biased in small samples and __________ in large samples if there is a correlation between the regressors and the error terms.