Using the Textbook Example of 420 California School Districts and the Regression

question 7

Multiple Choice

Using the textbook example of 420 California school districts and the regression of testscores on the student-teacher ratio, you find that the standard error on the slope coefficient is 0.51 when using the heteroskedasticity robust formula, while it is 0.48 when employing the homoskedasticity only formula. When calculating the t-statistic, the recommended procedure is to

• A)use the homoskedasticity only formula because the t-statistic becomes larger
• B)first test for homoskedasticity of the errors and then make a decision
• C)use the heteroskedasticity robust formula
• D)make a decision depending on how much different the estimate of the slope is under the two procedures

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