HAC Standard Errors and Clustered Standard Errors Are Related as Follows

question 18

Multiple Choice

HAC standard errors and clustered standard errors are related as follows:

• A)they are the same
• B)clustered standard errors are one type of HAC standard error
• C)they are the same if the data is differenced
• D)clustered standard errors are the square root of HAC standard errors

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Definitions:

Discount Rate

A rate used to convert future cash flows into their present value, fundamental in the assessment of investment attractiveness.

IRR

Internal Rate of Return (IRR) is a financial measure used to evaluate the profitability of potential investments by calculating the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Initial Cost

The initial outlay or expenditure associated with the purchase or acquisition of an asset, not including ongoing operating or maintenance costs.

Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.