Quiz 4 (Tien)

Question 1
A stochastic process refers to a:
a.sequence of random variables indexed by time.
b.sequence of variables that can take fixed qualitative values.
c.sequence of random variables that can take binary values only.
d.sequence of random variables estimated at the same point of time.

Question 2
The interpretation of goodness-of-fit measures changes in the presence of heteroskedasticity.
True
False

Question 3
Which of the following is true of heteroskedasticity?
a.Heteroskedasticty causes inconsistency in the Ordinary Least Squares estimators.
b.Population R2 is affected by the presence of heteroskedasticty.
c.The Ordinary Least Square estimators are not the best linear unbiased estimators if
heteroskedasticity is present.
d.It is not possible to obtain F statistics that are robust to heteroskedasticity of an unknown
form.

Question 4
A test for heteroskedasticty can be significant if _____.
a.the Breusch-Pagan test results in a large p-value
b.the White test results in a large p-value
c.the functional form of the regression model is misspecified
d.the regression model includes too many independent variables

Question 5
Refer to the following model

This is an example of a(n):

a.infinite distributed lag model.
b.finite distributed lag model of order 1.
c.finite distributed lag model of order 2.
d.finite distributed lag model of order 3.

Question 6
Consider the following regression model: . If the first four Gauss-Markov
assumptions hold true, and the error term contains heteroskedasticity, then _____.
a.Var(ui|xi) = 0
b.Var(ui|xi) = 1

c.Var(ui|xi) =
d.Var(ui|xi) =

Question 7
The sample size for a time series data set is the number of:
a.variables being measured.
b.time periods over which we observe the variables of interest less the number of variables
being measured.
c.time periods over which we observe the variables of interest plus the number of variables
being measured.
d.time periods over which we observe the variables of interest.

Question 8
Which of the following statements is true?
a.The average of an exponential time series is a linear function of time.
b.The average of a linear sequence is an exponential function of time.
c.When a series has the same average growth rate from period to period, it can be
approximated with an exponential trend.
d.When a series has the same average growth rate from period to period, it can be
approximated with a linear trend.

Question 9
Which of the following is an assumption on which time series regression is based?
a.A time series process follows a model that is nonlinear in parameters.
b.In a time series process, no independent variable is a perfect linear combination of the
others.
c.In a time series process, at least one independent variable is a constant.
d.For each time period, the expected value of the error ut, given the explanatory variables for
all time periods, is positive.

Question 10
With base year 1990, the index of industrial production for the year 1999 is 112. What will be
the value of the index in 1999, if the base year is changed to 1982 and the index measured 96
in 1982?
a.112.24
b.116.66
c.85.71
d.92.09
Question 11
Price indexes are necessary for turning a time series measured in real value into nominal
value.
True
False

Question 12
Multicollinearity among the independent variables in a linear regression model causes the
heteroskedasticity-robust standard errors to be large.
True
False

Question 13
The linear probability model contains heteroskedasticity unless _____.
a.the intercept parameter is zero
b.all the slope parameters are positive
c.all the slope parameters are zero
d.the independent variables are binary

Question 14
A static model is postulated when:
a.a change in the independent variable at time ‘t' is believed to have an effect on the
dependent variable at period ‘t + 1'.
b.a change in the independent variable at time ‘t' is believed to have an effect on the
dependent variable for all successive time periods.
c.a change in the independent variable at time ‘t' does not have any effect on the dependent
variable.
d.a change in the independent variable at time ‘t' is believed to have an immediate effect on
the dependent variable.

Question 15
Which of the following tests helps in the detection of heteroskedasticity?
a.The Breusch-Pagan test
b.The Breusch-Godfrey test
c.The Durbin-Watson test
d.The Chow test

Question 16
Adding a time trend can make an explanatory variable more significant if:
a.the dependent and independent variables have similar kinds of trends, but movement in the
independent variable about its trend line causes movement in the dependent variable away
from its trend line.
b.the dependent and independent variables have similar kinds of trends and movement in the
independent variable about its trend line causes movement in the dependent variable towards
its trend line.
c.the dependent and independent variables have different kinds of trends and movement in
the independent variable about its trend line causes movement in the dependent variable
towards its trend line.
d.the dependent and independent variables have different kinds of trends, but movement in
the independent variable about its trend line causes movement in the dependent variable away
from its trend line.

Question 17
The generalized least square (GLS) is an efficient procedure that weights each squared
residual by the:
a.conditional variance of ui given xi.
b.expected value of ui given xi.
c.inverse of the conditional variance of ui given xi.
d.square root of the inverse of the conditional variance of ui given xi.

Question 18

a.heteroskedasticity-robust t statistic
b.heteroskedasticity-robust standard error
c.heteroskedasticity-robust F statistic
d.heteroskedasticity-robust Wald statistic

Question 19
Economic time series are outcomes of random variables.
True
False
Feedback
The correct answer is 'True'.

Question 20
Which of the following is true?
Select one:
a.In ordinary least squares estimation, each observation is given a different weight.
b.In weighted least squares estimation, each observation is given an identical weight.
c.In weighted least squares estimation, less weight is given to observations with a higher error
variance.
d.In ordinary least squares estimation, less weight is given to observations with a lower error
variance.

Quiz 5 (tien)
Question 1
A complete cases estimator is an estimator that uses:
only observations with a complete set of data on y and x1, ..., xk
Select one:
a.only observations with a complete set of data on x1, ..., xk.
b.complete information about the residuals.
c.only observations with a complete set of data on y and x1, ..., xk.
d.complete information about the outliers.

Question 2
If the data are missing at random, then the missing data do not cause any statistical problems.
Select one:
True
False

Question 3
How many new variables should be created for a multiple regression model where data are
always available for y and x1, x2, ..., xk−1 but are sometimes missing for the explanatory
variable xk?
Select one:
a.One variable
b.Two variables
c.Three variables
d.Four variables

Question 4
Which of the following is a difference between least absolute deviations (LAD) and ordinary
least squares (OLS) estimation?
Select one:
a.OLS is more computationally intensive than LAD.
b.OLS is more sensitive to outlying observations than LAD.
c.OLS is justified for very large sample sizes while LAD is justified for smaller sample sizes.
d.OLS is designed to estimate the conditional median of the dependent variable while LAD is
designed to estimate the conditional mean.

Question 5
The Least Absolute Deviations (LAD) estimators in a linear model minimize the sum of
squared residuals.
Select one:
True
False

Question 6
Consider the following equation for household consumption expenditure:
Select one:
a.exogenous
b.binary variable
c.lagged dependent
d.proxy variable

Question 7
Which of the following is a test of nonnested models?
Select one:
a.Davidson-MacKinnon test
b.Standard F test
c.Regression Specification Error Test
d.White test

Question 8
An explanatory variable is called exogenous if it is correlated with the error term.
Select one:
True
False

Question 9
A multiple regression model suffers from functional form misspecification when it does not
properly account for the relationship between the dependent and the observed explanatory
variables.
Select one:
True
False

Question 10
Which of the following assumptions is needed for the plug-in solution to the omitted
variables problem to provide consistent estimators?
Select one:
a.The error term in the regression model exhibits heteroskedasticity.
b.The error term in the regression model is uncorrelated with all the independent variables.
c.The proxy variable is uncorrelated with the dependent variable.
d.The proxy variable has zero conditional mean.

Quiz 4 (Linh)
Question 1
If the Breusch-Pagan Test for heteroskedasticity results in a large p-value, the null hypothesis
of homoskedasticty is rejected.
a. True
b. False
Question 2
Under the assumptions of time series regression, which of the following statements will be

true of the following model:

a. d can have a lagged effect on y.
b. ut can be correlated with past and future values of d.
c. Changes in the error term cannot cause future changes in d.
d. Changes in d cannot cause changes in y at the same point of time.

Question 3

a. the short-run change in y given a temporary increase in s.

b. the short-run change in y given a permanent increase in s.
c. the long-run change in y given a permanent increase in s.
d. the long-run change in y given a temporary increase in s.

Question 4
Which of the following is true?
a. If we can estimate hi for each i, it means that we can proceed directly with WLS
estimation.
b. The WLS method fails if i is negative or zero for any observation.
c. The simplest way to deal with homoskedasticity in the linear probability model is to
continue to use OLS estimation.
d. The probability p(x) depends on the error term.
Question 5
The interpretation of goodness-of-fit measures changes in the presence of heteroskedasticity.
Select one:
True
False

Question 6
Which of the following tests is used to compare the Ordinary Least Squares (OLS) estimates
and the Weighted Least Squares (WLS) estimates?
Select one:
a. The White test
b. The Hausman test
c. The Durbin-Watson test
d. The Breusch-Godfrey test

Question 7
When a series has the same average growth rate from period to period, then it can be
approximated by an exponential trend.
Select one:
True
False

Question 8
The heteroskedasticity-robust _____ is also called the heteroskedastcity-robust Wald statistic.
Select one:
a. t statistic
b. F statistic
c. LM statistic
d. z statistic

Question 9
In a static model, one or more explanatory variables affect the dependent variable with a lag.
Select one:
True
False

Question 10

Select one:
a. upward trend.
b. downward trend.
c. exponential trend.
d. quadratic trend.

Question 11
What will you conclude about a regression model if the Breusch-Pagan test results in a small
p-value?
Select one:
a. The model contains homoskedasticty.
b. The model contains heteroskedasticty.
c. The model contains dummy variables.
d. The model omits some important explanatory factors.

Question 12
When the error variance differs across the two groups, we can obtain a heteroskedasticity-
robust Chow test by including a dummy variable distinguishing the two groups along with
interactions between that dummy variable and all other explanatory variables.
Select one:
True
False

Question 13
The general form of the t statistic is _____.
Select one:

a.

b.

c.
d.

Question 14
If an explanatory variable is strictly exogenous it implies that:
Select one:
a. changes in the lag of the variable does not affect future values of the dependent variable.
b. the variable is correlated with the error term in all future time periods.
c. the variable cannot react to what has happened to the dependent variable in the past.
d. the conditional mean of the error term given the variable is zero.

Question 15

Select one:
a. autoregressive conditional heteroskedasticity model.
b. static model.
c. finite distributed lag model.
d. infinite distributed lag model.

Question 16
Which of the following rules out perfect collinearity among the regressors?
Select one:
a. Multiple regression
b. Simple regression
c. Time series regression
d. Cross-sectional regression

Question 17
With base year 1990, the index of industrial production for the year 1999 is 112. What will be
the value of the index in 1999, if the base year is changed to 1982 and the index measured 96
in 1982?
Select one:
a. 112.24
b. 116.66
c. 85.71
d. 92.09

Question 18
Which of the following is true of the White test?
Select one:
a. The White test is used to detect the presence of multicollinearity in a linear regression
model.
b. The White test cannot detect forms of heteroskedasticity that invalidate the usual Ordinary
Least Squares standard errors.
c. The White test can detect the presence of heteroskedasticty in a linear regression model
even if the functional form is misspecified.
d. The White test assumes that the square of the error term in a regression model is
uncorrelated with all the independent variables, their squares and cross products.

Question 19
The short-run elasticity measures the immediate percentage change in a dependent variable
given a 1% increase in the independent variables.
Select one:
True
False

Question 20
A test for heteroskedasticty can be significant if _____.
Select one:
a. the Breusch-Pagan test results in a large p-value
b. the White test results in a large p-value
c. the functional form of the regression model is misspecified
d. the regression model includes too many independent variables

Quiz 5 (Linh)
Question 2
Which of the following is true?
Select one:
a. A functional form misspecification can occur if the level of a variable is used when the
logarithm is more appropriate.
Đúng
b. A functional form misspecification occurs only if a key variable is uncorrelated with the
error term.
c. A functional form misspecification does not lead to biasedness in the ordinary least squares
estimators.
d. A functional form misspecification does not lead to inconsistency in the ordinary least
squares estimators.
Question 3
One of the assumptions for the plug-in solution to provide consistent estimators of β1 and β2
is that the error u is uncorrelated with all the independent variables.
Select one:
True
False

Question 5
A regression model suffers from functional form misspecification if _____.
Select one:
a. a key variable is binary.
b. the dependent variable is binary.
c. an interaction term is omitted.
d. the coefficient of a key variable is zero.

Question 6
Which of the following types of sampling always causes bias or inconsistency in the ordinary
least squares estimators?
Select one:
a. Random sampling
b. Exogenous sampling
c. Endogenous sampling
d. Stratified sampling

Question 9
A proxy variable _____.
Select one:
a. increases the error variance of a regression model
b. cannot contain binary information
c. is used when data on a key independent variable is unavailable
d. is detected by running the Davidson-MacKinnon test

Question 10
Which of the following is a drawback of including proxy variables in a regression model?
Select one:
a. It leads to misspecification analysis.
b. It reduces the error variance.
c. It increases the error variance.
d. It exacerbates multicollinearity.

_________________________________________________________________________
QUIZ 4 (KIM)
Question 2
Consider the following regression model: yi = Beta0 +Beta 1xi + ui. If the first four Gauss-
Markov assumptions hold true, and the error term contains heteroskedasticity, then _____.
a.Var(ui|xi) = 0
b.Var(ui|xi) = 1
c.Var(ui|xi) = constanti2
d.Var(ui|xi) = constant

Question 6
Time series regression is based on series which exhibit serial correlation.
True
False

Question 9
The sample size for a time series data set is the number of:
a.variables being measured.
b.time periods over which we observe the variables of interest less the number of variables
being measured.
c.time periods over which we observe the variables of interest plus the number of variables
being measured.
d.time periods over which we observe the variables of interest.

Question 10
The linear probability model always contains heteroskedasticity when the dependent variable
is a binary variable unless all of the slope parameters are zero.
True
False

Question 11
Which of the following correctly identifies a difference between cross-sectional data and time
series data?
a.Cross-sectional data is based on temporal ordering, whereas time series data is not.
b.Time series data is based on temporal ordering, whereas cross-sectional data is not.
c.Cross-sectional data consists of only qualitative variables, whereas time series data consists
of only quantitative variables.
d.Time series data consists of only qualitative variables, whereas cross-sectional data does
not include qualitative variables.

Question 12
When a series has the same average growth rate from period to period, then it can be
approximated by an exponential trend.
True
False
Question 13
A seasonally adjusted series is one which:
a.has had seasonal factors added to it.
b.has seasonal factors removed from it.
c.has qualitative dependent variables representing different seasons.
d.has qualitative explanatory variables representing different seasons.

Question 14
Which of the following is true of the OLS t statistics?
a.The heteroskedasticity-robust t statistics are justified only if the sample size is large.
b.The heteroskedasticty-robust t statistics are justified only if the sample size is small.
c.The usual t statistics do not have exact t distributions if the sample size is large.
d.In the presence of homoskedasticity, the usual t statistics do not have exact t distributions if
the sample size is small.

Question 15
Which of the following is true?
a.If we can estimate hi for each i, it means that we can proceed directly with WLS estimation.
b.The WLS method fails if H^i is negative or zero for any observation.
c.The simplest way to deal with homoskedasticity in the linear probability model is to
continue to use OLS estimation.
d.The probability p(x) depends on the error term.

Question 17
The linear probability model contains heteroskedasticity unless _____.
a.the intercept parameter is zero
b.all the slope parameters are positive
c.all the slope parameters are zero
d.the independent variables are binary

Question 18
A study which observes whether a particular occurrence influences some outcome is referred
to as a(n):
a.event study.
b.exponential study.
c.laboratory study.
d.comparative study.

Question 19
Consider the following regression equation: =Beta0 +beta1 x1+ u. Which of the following
indicates a functional form misspecification in E(y|x)?
a.Ordinary Least Squares estimates equal Weighted Least Squares estimates.
b.Ordinary Least Squares estimates exceed Weighted Least Squares estimates by a small
magnitude.
c.Weighted Least Squares estimates exceed Ordinary Least Squares estimates by a small
magnitude.
d.Ordinary Least Square estimates are positive while Weighted Least Squares estimates are
negative.

Question 20
Which of the following is true?
a.In ordinary least squares estimation, each observation is given a different weight.
b.In weighted least squares estimation, each observation is given an identical weight.
c.In weighted least squares estimation, less weight is given to observations with a higher error
variance.
d.In ordinary least squares estimation, less weight is given to observations with a lower error
variance.

QUIZ 5 (KIM)
Question 1. Sample selection based on the dependent variable is called _____.

a.random sample selection

b.endogenous sample selection

c.exogenous sample selection

d.stratified sample selection

Question 2Studentized residuals are obtained from the original OLS residuals by
dividing them by an estimate of their standard deviation.

True

Question 3How many new variables should be created for a

multiple regression model where data are always available for y
and x1, x2, ..., xk−1 but are sometimes missing for the
explanatory variable xk?

a.One variable

b.Two variables

c.Three variables

d.Four variables

Question 4A proxy variable _____.

a.increases the error variance of a regression model

 b.cannot contain binary information

c.is used when data on a key independent variable is unavailable

d. is detected by running the Davidson-MacKinnon test

Question 5Which of the following is a difference between least absolute deviations

(LAD) and ordinary least squares (OLS) estimation?

a.OLS is more computationally intensive than LAD.

b.OLS is more sensitive to outlying observations than LAD.

c.OLS is justified for very large sample sizes while LAD is justified for smaller sample
sizes.

d.OLS is designed to estimate the conditional median of the dependent variable while
LAD is designed to estimate the conditional mean.

Question 6Consider the following equation for household consumption expenditure:

Consmptn= 0+ 1Inc + 2Consmptn-1+ u

where ‘Consmptn' measures the monthly consumption expenditure of a household, ‘Inc'

measures household income and ‘Consmptn-1' is the consumption expenditure in the
previous month. Consmptn-1 is a _____ variable

a.exogenous

b.binary variable

c.lagged dependent

d.proxy variable

Question 7Consider the following regression model: log(y) = 0 + 1x1 + 2x12 + 3x3 + u.
This model will suffer from functional form misspecification if _____.

a.0 is omitted from the model

b.u is heteroskedastic

c.x12 is omitted from the model

d.x3 is a binary variable

 Question 8Which of the following is true of Regression Specification Error Test
(RESET)?

a.It tests if the functional form of a regression model is misspecified.

b.It detects the presence of dummy variables in a regression model.

c.It helps in the detection of heteroskedasticity when the functional form of the model is
correctly specified.

d.It helps in the detection of multicollinearity among the independent variables in a

regression model.

Question 9A multiple regression model suffers from functional form misspecification

when it does not properly account for the relationship between the dependent and the
observed explanatory variables.

True

Question 10

A complete cases estimator is an estimator that uses: only observations with a complete
set of data on y and x1, ..., xk

a.only observations with a complete set of data on x1, ..., xk.

b.complete information about the residuals.

c.only observations with a complete set of data on y and x1, ..., xk.

d.complete information about the outliers.

QUIZ 4 TUYEN

1. Dummy variables can be used to address the problem of seasonality in regression

models.
True
False

2. Which of the following is true?

a. If we can estimate hi for each i, it means that we can proceed directly with WLS
estimation.
b. The WLS method fails if i is negative or zero for any observation.
 c. The simplest way to deal with homoskedasticity in the linear probability model is to
continue to use OLS estimation.
d. The probability p(x) depends on the error term.

3. The propensity δ0 + δ1+ … + δk is sometimes called the:

a. short-run elasticity, which measures the percentage increase in a dependent variable
after k quarters given a permanent 1% increase in the k independent variables.
b. long-run elasticity, which measures the percentage increase in a dependent
variable after k quarters given a permanent 1% increase in the k independent
variables.
c. short-run elasticity, which measures the percentage decrease in a dependent variable
after k quarters given a permanent 1% decrease in the k independent variables.
d. long-run elasticity, which measures the percentage decrease in a dependent variable
after k quarters given a permanent 1% decrease in the k independent variables.

4. Which of the following is true of the OLS t statistics?

a. The heteroskedasticity-robust t statistics are justified only if the sample size is
large.
b. The heteroskedasticty-robust t statistics are justified only if the sample size is small.
c. The usual t statistics do not have exact t distributions if the sample size is large.
d. In the presence of homoskedasticity, the usual t statistics do not have exact t
distributions if the sample size is small.

5. Which of the following tests helps in the detection of heteroskedasticity?

a. The Breusch-Pagan test
b.The Breusch-Godfrey test
c.The Durbin-Watson test
d.The Chow test

6. Which of the following is a difference between the White test and the Breusch-Pagan
test?
Select one:
a. The White test is used for detecting heteroskedasticty in a linear regression model
while the Breusch-Pagan test is used for detecting autocorrelation.
b. The White test is used for detecting autocorrelation in a linear regression model while
the Breusch-Pagan test is used for detecting heteroskedasticity. .
c. The number of regressors used in the White test is larger than the number of
regressors used in the Breusch-Pagan test.
d. The number of regressors used in the Breusch-Pagan test is larger than the number of
regressors used in the White test.

8. A stochastic process refers to a:

a. sequence of random variables indexed by time.
b. sequence of variables that can take fixed qualitative values.
 c. sequence of random variables that can take binary values only.
d. sequence of random variables estimated at the same point of time.

10. Which of the following is true of the White test?

Select one:
a. The White test is used to detect the presence of multicollinearity in a linear regression
model.
b. The White test cannot detect forms of heteroskedasticity that invalidate the usual
Ordinary Least Squares standard errors.
c. The White test can detect the presence of heteroskedasticty in a linear regression
model even if the functional form is misspecified.
d. The White test assumes that the square of the error term in a regression model is
uncorrelated with all the independent variables, their squares and cross
products.

11. If an explanatory variable is strictly exogenous it implies that:

Select one:
a. changes in the lag of the variable does not affect future values of the dependent
variable.
b. the variable is correlated with the error term in all future time periods.
c. the variable cannot react to what has happened to the dependent variable in the
past.
d. the conditional mean of the error term given the variable is zero.

12. Economic time series are outcomes of random variables.

Select one:
True
False

14. The generalized least square estimators for correcting heteroskedasticity are called
weighed least squares estimators.
Select one:
True Correct
False

15. The model: Yt = 0 + 1ct + ut, t = 1,2,……., n is an example of a(n):

Select one:
a. autoregressive conditional heteroskedasticity model.
b. static model.
c. finite distributed lag model.
d. infinite distributed lag model.

16. If the Breusch-Pagan Test for heteroskedasticity results in a large p-value, the null
hypothesis of homoskedasticty is rejected.
 True
False

17. Which of the following statements is true?

Select one:
a. The average of an exponential time series is a linear function of time.
b. The average of a linear sequence is an exponential function of time.
c. When a series has the same average growth rate from period to period, it can be
approximated with an exponential trend.
d. When a series has the same average growth rate from period to period, it can be
approximated with a linear trend.

18. When the error variance differs across the two groups, we can obtain a heteroskedasticity-
robust Chow test by including a dummy variable distinguishing the two groups along with
interactions between that dummy variable and all other explanatory variables.
Select one:
True
False

19. The interpretation of goodness-of-fit measures changes in the presence of

heteroskedasticity.
True
False

20. Adding a time trend can make an explanatory variable more significant if:
Select one:
a. the dependent and independent variables have similar kinds of trends, but movement
in the independent variable about its trend line causes movement in the dependent
variable away from its trend line.
b. the dependent and independent variables have similar kinds of trends and movement
in the independent variable about its trend line causes movement in the dependent
variable towards its trend line.
c. the dependent and independent variables have different kinds of trends and movement
in the independent variable about its trend line causes movement in the dependent
variable towards its trend line.
d. the dependent and independent variables have different kinds of trends, but
movement in the independent variable about its trend line causes movement in
the dependent variable away from its trend line.

QUIZ 5

1. The Least Absolute Deviations (LAD) estimators in a linear model minimize the sum
of squared residuals.
True
 False

2. An explanatory variable is called exogenous if it is correlated with the error term.

True
False Correct

3. Which of the following assumptions is needed for the plug-in solution to the omitted
variables problem to provide consistent estimators?
a. The error term in the regression model exhibits heteroskedasticity.
b. The error term in the regression model is uncorrelated with all the independent
variables.
c. The proxy variable is uncorrelated with the dependent variable.
d. The proxy variable has zero conditional mean.

4. Consider the following regression model: log(y) = 0 + 1x1 + 2x12 + 3x3 + u. This model
will suffer from functional form misspecification if _____.
a. 0 is omitted from the model
b. u is heteroskedastic
c. x12 is omitted from the model
d. x3 is a binary variable

5. One of the assumptions for the plug-in solution to provide consistent estimators of β1 and
β2 is that the error u is uncorrelated with all the independent variables.
True
False

6. A multiple regression model suffers from functional form misspecification when it does
not properly account for the relationship between the dependent and the observed explanatory
variables.
Select one:
True
False

7. Studentized residuals are obtained from the original OLS residuals by dividing them by an
estimate of their standard deviation.
Select one:
True Correct
False

8. Which of the following is a test of nonnested models?

Select one:
a. Davidson-MacKinnon test
 b. Standard F test
c. Regression Specification Error Test
d. White test

9. Which of the following is a drawback of including proxy variables in a regression model?

Select one:
a. It leads to misspecification analysis.
b. It reduces the error variance.
c. It increases the error variance.
d. It exacerbates multicollinearity.

10. Sample selection based on the dependent variable is called _____.

Select one:
a. random sample selection
b. endogenous sample selection
c. exogenous sample selection
d. stratified sample selection

Quiz 4 (Vy)
1. Which of the following is an assumption on which time series regression is based?
a. A time series process follows a model that is nonlinear in parameters.
b. In a time series process, no independent variable is a perfect linear combination of the
others.
c. In a time series process, at least one independent variable is a constant.
d. For each time period, the expected value of the error ut, given the explanatory
variables for all time periods, is positive.

2. Multicollinearity among the independent variables in a linear regression model causes the
heteroskedasticity-robust standard errors to be large.
True

3. Which of the following is true of the White test?

a. The White test is used to detect the presence of multicollinearity in a linear
regression model.
b. The White test cannot detect forms of heteroskedasticity that invalidate the usual
Ordinary Least Squares standard errors.
c. The White test can detect the presence of heteroskedasticty in a linear regression
model even if the functional form is misspecified.
d. The White test assumes that the square of the error term in a regression model is
uncorrelated with all the independent variables, their squares and cross products.

4. Which of the following tests helps in the detection of heteroskedasticity?

a. The Breusch-Pagan test
b. The Breusch-Godfrey test
 c. The Durbin-Watson test
d. The Chow test

6. Weighted least squares estimations is used only when _____.

a. The dependent variable in a regression model is binary
b. The independent variables in a regression model are correlated
c. The error term in a regression model has a constant variance
d. The functional form of the error variances is known

7. The propensity δ0 + δ1+ … + δk is sometimes called the

a. short-run elasticity, which measures the percentage increase in a dependent variable
after k quarters given a permanent 1% increase in the k independent variables.
b. long-run elasticity, which measures the percentage increase in a dependent variable
after k quarters given a permanent 1% increase in the k independent variables.
c. short-run elasticity, which measures the percentage decrease in a dependent variable
after k quarters given a permanent 1% decrease in the k independent variables.
d. long-run elasticity, which measures the percentage decrease in a dependent variable
after k quarters given a permanent 1% decrease in the k independent variables.

8. Dummy variables can be used to address the problem of seasonality in regression models.
True
False

10. When the error variance differs across the two groups, we can obtain a heteroskedasticity-
robust Chow test by including a dummy variable distinguishing the two groups along with
interactions between that dummy variable and all other explanatory variables.
True
False

11. A study which observes whether a particular occurrence influences some outcome is
referred to as a(n):
Select one:
a. event study.
b. exponential study.
c. laboratory study.
d. comparative study.

12. If the Breusch-Pagan Test for heteroskedasticity results in a large p-value, the null
hypothesis of homoskedasticty is rejected.
True
False

15. Refer to the following model.

yt = 0 + B0st + B1st-1 + B2st-2 + B3st-3 + ut
B0+B1+B2+B3 represents:
a. the short-run change in y given a temporary increase in s.
b. the short-run change in y given a permanent increase in s.
c. the long-run change in y given a permanent increase in s.
d. the long-run change in y given a temporary increase in s.

17. Which of the following is true?

a. If we can estimate hi for each i, it means that we can proceed directly with WLS
estimation.
b. The WLS method fails if i is negative or zero for any observation.
c. The simplest way to deal with homoskedasticity in the linear probability model is to
continue to use OLS estimation.
d. The probability p(x) depends on the error term.

18. Which of the following tests is used to compare the Ordinary Least Squares (OLS)
estimates and the Weighted Least Squares (WLS) estimates?
a. The White test
b. The Hausman test
c. The Durbin-Watson test
d. The Breusch-Godfrey test

20. With base year 1990, the index of industrial production for the year 1999 is 112. What
will be the value of the index in 1999, if the base year is changed to 1982 and the index
measured 96 in 1982?
a. 112.24
b. 116.66
c. 85.71
d. 92.09