Which of the following is true of two stage least squares estimators?

A. The two stage least squares estimator is equal to the instrumental variable estimator if R2 is equal to 1.
B. The two stage least squares estimators are biased if the regression model exhibits multicollinearity.
C. The two stage least squares estimators have lower variance than the ordinary least squares estimators.
D. The two stage least squares estimators have large standard errors when R2 lies close to 0.


Answer: B

Economics

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