If OLS Is Used in the Presence of Heteroscedasticity, Which

question 24

Multiple Choice

If OLS is used in the presence of heteroscedasticity, which of the following will be likely consequences?
(I) Coefficient estimates may be misleading
(ii) Hypothesis tests could reach the wrong conclusions
(iii) Forecasts made from the model could be biased
(iv) Standard errors may inappropriate

• A) (ii) and (iv) only
• B) (i) and (iii) only
• C) (i), (ii), and (iii) only
• D) (i), (ii), (iii), and (iv).

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Definitions:

Cost-Effective Changes

Adjustments or improvements to processes, systems, or products that maximize benefits while minimizing costs.

Production

The process of creating goods or services through the combination of labor, materials, and technology.

Operation

The day-to-day activities necessary for an organization to function effectively and achieve its goals.

Raw Materials

The fundamental components or basic substances used in the production of goods or services.