Question #86

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 41

Status: Unattempted

Correct Answer: A

Part of Context Group: Q86-87 First in Group
Shared Context
- The test mentioned by Jessica is known as the: A) Breusch-Pagan, which is a two-tailed test. B) Breusch-Pagan, which is a one-tailed test. C) Durbin-Watson, which is a two-tailed test.
Question
Are Jessica and her son Jonathan, correct in terms of the method used to correct for heteroskedasticity and the likely effects?
Answer Choices:
A. Neither is correct
B. Both are correct
Explanation
Jessica is correct. White-corrected standard errors are also known as robust standard errors. Jonathan is correct because White-corrected errors are higher than the biased errors leading to lower computed t-statistics and therefore less frequent rejection of the Null Hypothesis (remember incorrectly rejecting a true Null is Type I error).
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