Which of the Following Assumptions Is Required for Two-Stage Least

question 16

Multiple Choice

Which of the following assumptions is required for two-stage least squares estimation method?

• A)There are perfect linear relationships among the instrumental variables.
• B)There is strong correlation between each instrumental variable and the error term.
• C)The conditional variance of the error term depends on an exogenous explanatory variable.
• D)The error term has zero mean.

---

Definitions:

Recent Recession

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in successive quarters.

Stock Prices

The cost or value of a share of a company's stock, which fluctuates based on supply and demand, market conditions, and company performance.

Transactional Leaders

Leaders who focus on routine, supervision, and performance-based rewards and punishments.

Empower

To give authority or power to individuals, enabling them to take control of their situations and make significant decisions.