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Multiple Regression

 

 

  • Using more than one explanatory variable in a regression model
    • Y = b0 + b1X1 + b2X2 + b3X3 + uI
  • Omitted variable bias
    • The biasness incurred due to omission of one or more explanatory variable from the model.
  • Omitted variable bias occurs when two conditions are met:
    • Omitted variables are correlated with the independent variable
    • Variables that are not accounted for in the model but affect the dependent variable 





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