Measurement Errors, Linear Regression, Variance, Correlation.
the error term ϵ of the original model. It isn’t necessarily smaller, because its value depends on the signs of ϵ, β_3 and δ. In fact, as we’ll see in a bit, in absolute terms, it may be larger than the error of the original model. The error (ϵ — β_3*δ) is a linear combination of the presumably