A Study Based on OLS Regressions Is Internally Valid If

question 37

Multiple Choice

A study based on OLS regressions is internally valid if

• A)the errors are homoskedastic, and there are no more than two binary variables present among the regressors.
• B)you use a two-sided alternative hypothesis, and standard errors are calculated using the heteroskedasticity-robust formula.
• C)weighted least squares produces similar results, and the t-statistic is normally distributed in large samples.
• D)the OLS estimator is unbiased and consistent, and the standard errors are computed in a way that makes confidence intervals have the desired confidence
• Level.

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Definitions:

Share Price

The current price at which a share of a company is bought or sold on the stock market.

Free Cash Flow (FCF)

The money a business produces once it has subtracted the funds used to sustain its operations and keep up its capital assets.

Weighted Average Cost of Capital (WACC)

The rate that a company is expected to pay on average to all its security holders to finance its assets, a measure of the cost of capital.

Intrinsic Value

The inherent, actual value of an asset, determined by internal characteristics and fundamentals, rather than current market price.