Measurement Errors, Linear Regression, Variance, Correlation.
correlated with δ. Since x_3 is also uncorrelated with the error term ϵ, it implies that x_3 is uncorrelated with the composite error term (ϵ — β_3*δ). Thus, in Eq (6), x_3 continues to remain exogenous. There is usually no compelling reason to believe that the other regression variables in the