A Spurious Regression Refers to a Situation Where

question 3

Multiple Choice

A spurious regression refers to a situation where:

• A)the direction of the relationship between the dependent variable and the explanatory variables is uncertain.
• B)even though two variables are independent, the OLS regression of one variable on the other indicates a relationship between them.
• C)a few important and necessary explanatory variables are left out of a regression equation, thus leading to inefficient and inconsistent forecasts.
• D)at least one of the variables used in a regression equation does not have a unit root and the error terms are heteroskedastic.

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