(Requires Appendix Material) When the Fifth Assumption in the Fixed $\left( \operatorname { cov } \left( u _ { i t } , u _ { i s } \mid X _ { i i } , X _ { i s } \right) = 0 \text { for } t \neq s \right)$

question 29

Multiple Choice

(Requires Appendix material) When the fifth assumption in the Fixed Effects regression $\left( \operatorname { cov } \left( u _ { i t } , u _ { i s } \mid X _ { i i } , X _ { i s } \right) = 0 \text { for } t \neq s \right)$ is violated, then

• A) using heteroskedastic-robust standard errors is not sufficient for correct statistical inference when using OLS.
• B) the OLS estimator does not exist.
• C) you can use the simple homoskedasticity-only standard errors calculated in your regression package.
• D) you cannot use fixed time effects in your estimation.

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Definitions:

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are likely to yield the highest returns.

What-If Questions

Hypothetical queries used in analysis or decision-making to explore different outcomes based on varying scenarios.

Shareholder Wealth

Refers to the collective value of all shares held by investors in a corporation, ideally increasing as the company becomes more successful and its stock price rises.

Cash Flow Forecasts

Predictions of all the cash inflows and outflows expected to occur in a future period, helping businesses to ensure they maintain sufficient levels of cash.