(Requires Appendix Material)When the Fifth Assumption in the Fixed Effects

question 31

Multiple Choice

(Requires Appendix material) When the fifth assumption in the Fixed Effects regression (cov (u_it, u_is | X_it, X_is) = 0 for t ? s) is violated, then

• A)using heteroskedastic-robust standard errors is not sufficient for correct statistical inference when using OLS.
• B)the OLS estimator does not exist.
• C)you can use the simple homoskedasticity-only standard errors calculated in your regression package.
• D)you cannot use fixed time effects in your estimation.

---

Definitions:

Dependent Variable

A factor in a study or model that is anticipated to vary as a result of alterations in the independent variable.

Independent Variable

An experimental variable that is changed or controlled to test its effects on dependent variables.

Coefficient Of Determination

A metric in statistics that evaluates the percentage of variability in the outcome variable that can be explained by the predictor variable(s).

SSE

Sum of Squared Errors, a measure used in statistics to quantify the discrepancy between data points and a model's predictions.