Question #122 - Reading 1 Multiple Regression

Reading: Reading 1 Multiple Regression

PDF File: Reading 1 Multiple Regression.pdf

Page: 60

Status: Unattempted

Correct Answer: B

Shared Context

- Salve runs a regression using the squared residuals from the model using the original dependent variables. The coefficient of determination of this model is 6%. Which of the following is the most appropriate conclusion at a 5% level of significance? A) Because the test statistic of 7.20 is higher than the critical value of 3.84, we reject the null hypothesis of no conditional heteroskedasticity in residuals. B) Because the test statistic of 7.20 is lower than the critical value of 7.81, we fail to reject the null hypothesis of no conditional heteroskedasticity in residuals. C) Because the test statistic of 3.60 is lower than the critical value of 3.84, we reject the null hypothesis of no conditional heteroskedasticity in residuals.

Question

Which of the following misspecifications is most likely to cause serial correlation in residuals?

Answer Choices:

A. Data improperly pooled

B. Improper variable scaling

C. Improper variable form

Explanation

Out of the four forms of model misspecifications, serial correlation in residuals may be caused by omission of important variables (not an answer choice) and by improper data pooling.

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