The Presence of Correlated Error Terms Creates Problems for Inference

question 42

Multiple Choice

The presence of correlated error terms creates problems for inference based on OLS. These can be overcome by

• A)using HAC standard errors.
• B)using heteroskedasticity-robust standard errors.
• C)reordering the observations until the correlation disappears.
• D)using homoskedasticity-only standard errors.

---

Definitions:

P-value

A statistical measure that helps to determine the significance of results obtained in hypothesis testing, indicating the probability of observing the results if the null hypothesis were true.

P-value

The probability of observing a statistic at least as extreme as the one observed, under the assumption the null hypothesis is true.

P-value

A statistical measure that helps researchers determine the significance of their experimental results, indicating the probability of observing the results by chance.

Significance Level

A threshold within a statistical test that defines the probability of rejecting the null hypothesis when it is actually true, often denoted as alpha (α).