It Is Advisable to Use Clustered Standard Errors in Panel

question 25

Multiple Choice

It is advisable to use clustered standard errors in panel regressions because

• A)without clustered standard errors, the OLS estimator is biased
• B)hypothesis testing can proceed in a standard way even if there are few entities (n is small)
• C)they are easier to calculate than homoskedasticity-only standard errors
• D)the fixed effects estimator is asymptotically normally distributed when n is large

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Definitions:

Authoritarian Leadership

A leadership style characterized by individual control over all decisions and little input from group members.

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The total market value of all goods and services produced within a country in a specific time period, a primary indicator of economic health.

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A company’s exposure to unexpected change in foreign exchange rates.