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    Set 2 Econometrics

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    Naresh Sehdev
    The document discusses several regression models and statements about those models. For the first model, which allows for heteroskedastic errors, statement (e) is incorrect because it says we should only address heteroskedasticity if homoskedasticity is rejected, when in fact we should report robust standard errors regardless. For the second model, which includes autocorrelated errors, statement (a) is incorrect because OLS is not efficient in this case. For the third example about near multicollinearity between regressors, statement (b) is incorrect because trying to reduce the standard errors in this situation would not lead to significant estimates.

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    Set 2 Econometrics

    Uploaded by

    Naresh Sehdev
    47 views1 page
    The document discusses several regression models and statements about those models. For the first model, which allows for heteroskedastic errors, statement (e) is incorrect because it says we should only address heteroskedasticity if homoskedasticity is rejected, when in fact we should report robust standard errors regardless. For the second model, which includes autocorrelated errors, statement (a) is incorrect because OLS is not efficient in this case. For the third example about near multicollinearity between regressors, statement (b) is incorrect because trying to reduce the standard errors in this situation would not lead to significant estimates.

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    The document discusses several regression models and statements about those models. For the first model, which allows for heteroskedastic errors, statement (e) is incorrect because it says we should only address heteroskedasticity if homoskedasticity is rejected, when in fact we should report robust standard errors regardless. For the second model, which includes autocorrelated errors, statement (a) is incorrect because OLS is not efficient in this case. For the third example about near multicollinearity between regressors, statement (b) is incorrect because trying to reduce the standard errors in this situation would not lead to significant estimates.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    47 views1 page

    Set 2 Econometrics

    Uploaded by

    Naresh Sehdev
    The document discusses several regression models and statements about those models. For the first model, which allows for heteroskedastic errors, statement (e) is incorrect because it says we should only address heteroskedasticity if homoskedasticity is rejected, when in fact we should report robust standard errors regardless. For the second model, which includes autocorrelated errors, statement (a) is incorrect because OLS is not efficient in this case. For the third example about near multicollinearity between regressors, statement (b) is incorrect because trying to reduce the standard errors in this situation would not lead to significant estimates.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    4.

    Consider the regression model, yi = β1 + β2xi2 + · · · + βKxiK + ei where errors may be


    heteroskedastic

    Choose the most incorrect statement.


    (a) The OLS estimators are consistent and unbiased.
    (b) We should report the OLS estimates with the robust standard errors.
    (c) The Gauss-Markov theorem may not apply.
    (d) The GLS cannot be used because we do not know the error variances in practice.
    (e) We should take care of heteroskedasticity only if homoskedasticity is rejected. ⇐ Answer

    5. Consider the regression model, yt = β1 + β2xt2 + · · · + βKxtK + et , et = ρet−1 + vt with −


    1 < ρ < 1 where vt ’s are independent random error terms with mean zero and variance σ 2 v
    .
    Choose the wrong statement.
    (a) OLS is unbiased, consistent, and efficient ⇐ Answer
    (b) We may use the OLS estimates with the HAC standard errors
    (c) The errors follow an AR(1) process if ρ 6= 0.
    (d) V ar(et) = σ 2 v/(1 − ρ 2 ) and Cov(et , et−k) = ρ kσ 2 v/(1 − ρ 2 ) for k > 0.
    (e) The Breusch-Godfrey test considers H0 : ρ = 0. 6.

    6. For each observation i = 1, · · · , n, the regressor xi,2 indicates “female,” and xi,3 indicates
    lipstick users. From the data, it is confirmed that xi,2 and xi,3 are similar, but not the same.
    That is, in the sample, there are some women not using a lipstick, and there are some men
    using a lipstick. Now, suppose that an econometrician regresses yi on all the regressors
    including xi,2 and xi,3 and finds that the standard errors of the OLS estimates are large.

    Choose the wrong statement.


    (a) This is called the near multicollinearity.
    (b) One should find a way to reduce the standard errors to have significant estimates. ⇐
    Answer (c) The large standard errors arise naturally due to the difficulty to disentangle the
    effect of xi,2 on yi from the effect of xi,3 on yi .
    (d) The OLS is unbiased and consistent.
    (e) None of the above is wrong. E

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