In Order to Use the T-Statistic for Hypothesis Testing and Constructing

question 25

Multiple Choice

In order to use the t-statistic for hypothesis testing and constructing a 95% confidence interval as $\pm$ 1.96 standard errors, the following three assumptions have to hold:

• A)the conditional mean of u_i, given X_i is zero; (X_i,Y_i), i = 1,2, …, n are i.i.d. draws from their joint distribution; X_i and u_i have four moments
• B)the conditional mean of u_i, given X_i is zero; (X_i,Y_i), i = 1,2, …, n are i.i.d. draws from their joint distribution; homoskedasticity
• C)the conditional mean of u_i, given X_i is zero; (X_i,Y_i), i = 1,2, …, n are i.i.d. draws from their joint distribution; the conditional distribution of u_i given X_i is normal
• D)none of the above