The Fixed X Assumption in Econometrics: Can the Textbooks Be Trusted?

Econometrics textbooks make use of the assumption of a fixed regressor matrix, although it is nearly always unrealistic for economic data.For developing the properties of the general linear model, this is a convenient simplification.But this assumption is retained when examining model specification.This practice has generated results that, if not erroneous, are certainly incomplete and thus deceptive.In particular, the omission of a variable or the imposition of any incorrect restriction may well increase the variance of estimated parameters rather than reduce it, as stated in the textbooks.