Which of the Following Statements Is True

question 16

Multiple Choice

Which of the following statements is true?

• A)In large samples there are not many discrepancies between the outcomes of the F test and the LM test.
• B)Degrees of freedom of the unrestricted model are necessary for using the LM test.
• C)The LM test can be used to test hypotheses with single restrictions only and provides inefficient results for multiple restrictions.
• D)The LM statistic is derived on the basis of the normality assumption.

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Definitions:

Rights Offering

A financial process by which a company offers its existing shareholders the opportunity to purchase additional shares at a discounted price before offering them to the public.

Existing Shareholders

Individuals or entities that currently own shares in a corporation.

Public Offering

The sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion or other purposes.