Which of the Following Correctly Identifies a Limitation of Logarithmic

question 19

Multiple Choice

Which of the following correctly identifies a limitation of logarithmic transformation of variables?

• A)Taking log of variables make OLS estimates more sensitive to extreme values in comparison to variables taken in level.
• B)Logarithmic transformations cannot be used if a variable takes on zero or negative values.
• C)Logarithmic transformations of variables are likely to lead to heteroskedasticity.
• D)Taking log of a variable often expands its range which can cause inefficient estimates.