Question
Suppose that your friend wrote a computer program that runs both simple and multiple linear regressions using OLS. Your friend asks you to test the
Suppose that your friend wrote a computer program that runs both simple and multiple linear regressions using OLS. Your friend asks you to test the software. After importing a dataset with 2000 observations and three cryptically named variablesY , X1, and X2you run two regressions. The first is a regression of Y on X1, which gives you an intercept estimate of 10.4, a slope estimate of -3.8, and R2 = 0.215. The second is a regression of Y on X1 and X2, which gives you an intercept estimate of 9.3, an X1 slope estimate of -2.9, an X2 slope estimate of -0.07, and R2 = 0.198. You tell your friend that they must made a mistake somewhere in their code. Why ?
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