Which of the Following Assumptions Is Required for Two-Stage Least

question 16

Multiple Choice

Which of the following assumptions is required for two-stage least squares estimation method?

• A)There are perfect linear relationships among the instrumental variables.
• B)There is strong correlation between each instrumental variable and the error term.
• C)The conditional variance of the error term depends on an exogenous explanatory variable.
• D)The error term has zero mean.

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