Which of the Following Statements Is True of Spurious Regressions

question 4

Multiple Choice

Which of the following statements is true of spurious regressions?

• A)The OLS estimates of the population parameters are efficient and unbiased and the t statistic is valid.
• B)Even if the explanatory variables and the dependent variable are independent times series processes,the R² can large.
• C)Spurious regressions are limited to I(0)processes,and are not possible in case of I(1)processes.
• D)Spurious regressions are limited to I(1)processes,and are not possible in case of I(0)processes.

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Definitions:

Horizontal Analysis

A financial analysis technique that compares historical financial data over a sequence of reporting periods, using a base period to identify trends and growth patterns.

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure, facilitating comparisons.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at different points in time, side-by-side, to facilitate comparison.

Plant Assets

Tangible resources that are used in the operations of the business and are not intended for sale to customers.