1. Today we will examine the consequences of incorrectly specifying the regression model we want to

estimate. In the Excel file you will see a series of worksheet tabs at the bottom of the window. The

tabs provide seven different model specifications as follows:

• Correct

• Omits variable x1

• Omits variable x2

• Includes irrelevant variable x3

• Variable x1 is measured imprecisely

• Includes the redundant variable x4 which is highly correlated with x1

• Excludes the model intercept alpha