Which of the Following Assumptions Is Required for Two Stages

question 1

Multiple Choice

Which of the following assumptions is required for two stages least squares estimation with time series data but not required for two-stage least squares estimation with cross sectional data?

• A)The conditional mean of the error term is zero.
• B)The error term has constant conditional variance.
• C)The model includes at least one dummy variable.
• D)The error terms are not serially correlated.

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Definitions:

Empirical Rule

A statistical norm that asserts for a normally distributed set of data, almost all of the data points are encompassed within three standard deviations from the mean value.

Sample Variance

The measure of dispersion of sample data points around the sample mean, providing an estimation of the population variance.

Sample Standard Deviation

A measure of the dispersion or variability of a set of sample data points around its mean.

Empirical Rule

The Empirical Rule, also known as the 68-95-99.7 rule, states that for a normal distribution, roughly 68% of data falls within one standard deviation of the mean, 95% within two standard deviations, and 99.7% within three standard deviations.