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Suppose That You Estimate the Regression Function You Might Be Concerned That

Question 23

Multiple Choice

Suppose that you estimate the regression function  Stock Price i=β0+β1 Wealth i+β2 Earnings i+β3 Rainfall i+εi\text { Stock Price } _ { i } = \beta _ { 0 } + \beta _ { 1 } \text { Wealth } _ { i } + \beta _ { 2 } \text { Earnings } _ { i } + \beta _ { 3 } \text { Rainfall } _ { i } + \varepsilon _ { i }
You might be concerned that β^2\hat { \beta } _ { 2 }
May have a large standard error because


A) investor wealth is likely an irrelevant independent variable.
B) the amount of rainfall is likely an irrelevant independent variable.
C) investor wealth is likely measured with error.
D) the first letter in the firm's name is likely an omitted variable.

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