Question

1.The Breusch-Pagan test for heteroskedasticity

A. tests for a relationship between the estimated residuals and the independent variables

B. tests for a relationship between the squared estimated residuals and the independent variables

C. tests for a relationship between the estimated residuals and the dependent variable

D. tests for a relationship between the squared estimated residuals and the dependent variable

2. In the presence of heteroskedasticity hypothesis testing is unreliable (T/F)

3. Plotting the residuals (predicted errors) against the independent variables may be helpful in diagnosing heteroskedasticity. Heteroskedasticity may be a problem if the plots.

A. show no relationship between the residuals and the dependent variable.

B.do not show an equal number of positive and negative values of the error.

C. appear completely random.

D. suggest a pattern in the errors.

4. The White's test for heteroskedasticity in the short form

A.tests for a relationship between the squared estimated residuals and the independent variables

B. tests for a relationship between the squared estimated residuals and the dependent variable

C. tests for a relationship between the squared estimated residuals and the fitted dependent variables

5. Serial correlation causes

both A and C

both B and C

(A) the coefficients in an OLS regression to be biased.

(B) the standard errors in an OLS regression to be biased.

(C) hypothesis tests to be invalid.

6. Heteroskedastic errors

A. means that errors across observations are not independent.

B. means that the estimate of the model parameters are biased

C. Means that the variance of the error terms differs across the observation

D. Means that the model is correctly specified

Answer 1

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1.

Ans: B

2.

Ans: True

3.

Ans: D

4.

Ans: A

5.

Ans: both B and C

6.

Ans: C

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