Question #49 - Reading 2 Time-Series Analysis

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 23

Status: Unattempted

Correct Answer: B

Shared Context

- Johnson's model was most likely designed to correct for: A) heteroskedasticity of model residuals. B) nonstationarity in time series data. C) cointegration in the time series.

Question

The presence of conditional heteroskedasticity of residuals in Johnson's model is would most likely to lead to:

Answer Choices:

A. invalid standard errors of regression coefficients, but statistical tests will still be valid

B. invalid standard errors of regression coefficients and invalid statistical tests

C. invalid estimates of regression coefficients, but the standard errors will still be valid

Explanation

The presence of conditional heteroskedasticity may leads to incorrect estimates of standard errors of regression coefficients and hence invalid tests of significance of the coefficients.

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