Answer- Endogeneity in regression arises when:

Solution Endogeneity occurs if CovXi,ui0. Causes include omitted variables, measurement error, or simultaneous causality. OLS estimates become biased and inconsistent in presence of endogeneity. Instrumental variable IV methods can correct this.

Question

Endogeneity in regression arises when:

A Error term has zero mean

B Independent variables are uncorrelated

C Independent variables are correlated with error term

D Multicollinearity exists

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