In the context of ordinary least squares (OLS) estimation in regression analysis, provide a detailed explanation of the circumstances that lead to omitted variable bias. Additionally, explain how the careful selection of factors to include in the model affects the precision and accuracy of the estimated outcomes.

Exam-Like

Omitted variable bias occurs when the omitted variable is correlated with the included regressor and is a determinant of the dependent variable.

67.9%

Omitted variable bias occurs when the omitted variable is correlated with the included regressor but is not a determinant of the dependent variable.

9.5%

Omitted variable bias occurs when the omitted variable is independent of the included regressor and is a determinant of the dependent variable.

15.5%

Omitted variable bias occurs when the omitted variable is independent of the included regressor but is not a determinant of the dependent variable

7.1%

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