Consider the Following Regression Equation

question 15

Multiple Choice

Consider the following regression equation: . Which of the following indicates a functional form misspecification in E(y|x) ?

• A)Ordinary Least Squares estimates equal Weighted Least Squares estimates.
• B)Ordinary Least Squares estimates exceed Weighted Least Squares estimates by a small magnitude.
• C) Weighted Least Squares estimates exceed Ordinary Least Squares estimates by a small magnitude.
• D) Ordinary Least Square estimates are positive while Weighted Least Squares estimates are negative.

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Definitions:

Loan Amount

The total sum of money borrowed from a lender that is expected to be repaid with interest.

Interest Rate

This is a fee, calculated as a percentage, that lenders charge borrowers for the use of their money or that borrowers earn on deposits.

Interest Payments

Payments made to lenders as compensation for the use of borrowed money, typically calculated as a percentage of the principal amount.

Interest Rates

The cost of borrowing money or the return on investment capital, expressed as a percentage of the money borrowed or invested.