Sample/practice exam 2017, questions and answers PDF

Preview

Summary

Download Sample/practice exam 2017, questions and answers PDF

Description

1. In the presence of serial correlation: a. estimated standard errors remain valid. b. estimated test statistics remain valid. c. estimated OLS values are not BLUE. d. estimated variance does not differ from the case of no serial correlation. ANSWER: c RATIONALE: FEEDBACK: As the Gauss-Markov Theorem requires both homoscedasticity and serially uncorrelated errors, OLS in no longer BLUE in the presence of serial correlation. POINTS: 1 DIFFICULTY Easy : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Properties of OLS with Serially Correlated Errors KEYWORDS: Bloom’s: Knowledge 2. When a series is stationary, weakly dependent, and has serial correlation: a. the adjusted R2 is inconsistent, while R2 is a consistent estimator of the population parameter. b. the adjusted R2 is consistent, while R2 is an inconsistent estimator of the population parameter. c. both the adjusted R2 and R2 are inconsistent estimators of the population parameter. d. both the adjusted R2 and R2 are consistent estimators of the population parameter. ANSWER: d RATIONALE: FEEDBACK: When a series is stationary, weakly dependent, and has serial 2 2 correlation both the adjusted R and R are consistent estimators of the population 2 2 parameter as the calculation of R and adjusted R is based on the variance of the dependent variable and the error term, which do not change over time. POINTS: 1 DIFFICULTY Moderate : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Properties of OLS with Serially Correlated Errors KEYWORDS: Bloom’s: Knowledge 3. A smaller standard error means: a. a larger t statistic. b. a smaller t statistic. c. a larger F statistic. d. a smaller F statistic. ANSWER: RATIONALE: POINTS: DIFFICULTY:

a FEEDBACK: A smaller standard error means a larger t statistic. 1 Easy

Cengage Learning Testing, Powered by Cognero

Page 1

NATIONAL STANDARDS: United States - BUSPROG: Analytic TOPICS: Properties of OLS with Serially Correlated Errors KEYWORDS: Bloom's: Knowledge 4. Which of the following is a test for serial correlation in the error terms? a. Johansen test b. Dickey Fuller test c. Durbin Watson test d. White test ANSWER: c RATIONALE: FEEDBACK: The Durbin Watson test can be used to test for serial correlation in error terms. POINTS: 1 DIFFICULTY: Easy NATIONAL STANDA United States - BUSPROG: Analytic RDS: TOPICS: Testing for Serial Correlation KEYWORDS: Bloom’s: Knowledge 5. For a given significance level, if the calculated value of the Durbin Watson statistic lies between the lower critical value and the upper critical value, _____. a. the hypothesis of no serial correlation is accepted b. the hypothesis of no serial correlation is rejected c. the test is inconclusive d. the hypothesis of heteroskedasticity is accepted ANSWER: c RATIONALE: FEEDBACK: For a given significance level, if the calculated value of the Durbin Watson statistic lies between the lower critical value and upper critical value, the test is inconclusive. POINTS: 1 DIFFICULTY Moderate : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Testing for Serial Correlation KEYWORDS: Bloom’s: Knowledge 6. Which of the following statements is true? a. When explanatory variables are not strictly exogenous, the t test for serial correlation is valid. b. When explanatory variables are not strictly exogenous, the Durbin Watson test for serial correlation is valid. c. Breusch-Godfrey test can be used to check for second order serial correlation. d. White test can be used to check for second order serial correlation. ANSWER: c RATIONALE: FEEDBACK: Breusch-Godfrey test can be used to check for second order serial correlation. Cengage Learning Testing, Powered by Cognero

Page 2

POINTS: DIFFICULTY: NATIONAL STANDA RDS: TOPICS: KEYWORDS:

1 Moderate United States - BUSPROG: Analytic Testing for Serial Correlation Bloom’s: Knowledge

7. The Breusch-Godfrey test statistic follows a: a. 2distribution. b. t distribution. c. normal distribution. d. F distribution. ANSWER: RATIONALE: POINTS: DIFFICULTY: NATIONAL STANDARDS : TOPICS: KEYWORDS:

a FEEDBACK: The Breusch-Godfrey test statistic follows a 2 distribution. 1 Easy United States - BUSPROG: Analytic Testing for Serial Correlation Bloom’s: Knowledge

8. In a model based on a weakly dependent time series with serial correlation and strictly exogenous explanatory variables, _____. a. the feasible generalized least square estimates are unbiased b. the feasible generalized least square estimates are BLUE c. the feasible generalized least square estimates are asymptotically more efficient than OLS estimates d. the feasible generalized least square estimates are asymptotically less efficient than OLS estimates ANSWER: c RATIONALE: FEEDBACK: In a model based on a weakly dependent time series with serial correlation and strictly exogenous explanatory variables the feasible generalized least square estimates are asymptotically more efficient than OLS estimates. POINTS: 1 DIFFICULTY Moderate : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Correcting for Serial Correlation with Strictly Exogenous Regressors KEYWORDS: Bloom’s: Knowledge 9. Which of the following is an example of FGLS estimation? a. Dickey-Fuller estimation b. Vector error correction estimation c. Prais-Winsten estimation Cengage Learning Testing, Powered by Cognero

Page 3

d. OLS estimation. ANSWER: RATIONALE: POINTS: DIFFICULTY: NATIONAL STANDARDS: TOPICS: KEYWORDS:

c FEEDBACK: Prais-Winsten estimation is a type of FGLS estimation. 1 Easy United States - BUSPROG: Analytic Correcting for Serial Correlation with Strictly Exogenous Regressors Bloom’s: Knowledge

10. Which of the following is the reason why standard errors measured by OLS differ from standard errors measured through Prais-Winsten transformation? a. OLS standard errors account for serial correlation, whereas Prais-Winsten estimations do not. b. Prais-Winsten standard errors account for serial correlation, whereas OLS estimations do not. c. Prais-Winsten standard errors account for heteroskedasticity, whereas OLS estimations do not. d. OLS standard errors account for heteroskedasticity, whereas Prais-Winsten estimations do not. ANSWER: b RATIONALE: FEEDBACK: The standard errors measured by OLS differ from the standard errors measured by Prais-Winsten transformation because Prais-Winsten standard errors account for serial correlation, whereas OLS estimations do not. POINTS: 1 DIFFICULTY Moderate : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Correcting for Serial Correlation with Strictly Exogenous Regressors KEYWORDS: Bloom’s: Knowledge 11. Consistency of FGLS requires: a. ut to be uncorrelated with xt-1, xt, and xt+1. b. ut to be uncorrelated with xt and xt+1. c. ut to be correlated with xt and xt+1. d. ut to be correlated with xt-1, xt, and xt+1. ANSWER: RATIONALE:

a FEEDBACK: Consistency of FGLS requires ut to be uncorrelated with

xt-1, xt, and xt+1. POINTS: DIFFICULTY: NATIONAL STANDA RDS: TOPICS: KEYWORDS:

1 Easy United States - BUSPROG: Analytic Correcting for Serial Correlation with Strictly Exogenous Regressors Bloom’s: Knowledge

Cengage Learning Testing, Powered by Cognero

Page 4

12. Which of the following identifies an advantage of first differencing a time-series? a. First differencing eliminates most of the serial correlation. b. First differencing eliminates most of the heteroskedastcicty. c. First differencing eliminates most of the multicollinearity. d. First differencing eliminates the possibility of spurious regression. ANSWER: a RATIONALE: FEEDBACK: First differencing of a time-series helps eliminate most of the serial correlation. POINTS: 1 DIFFICULTY: Easy NATIONAL STANDA United States - BUSPROG: Analytic RDS: TOPICS: Differencing and Serial Correlation KEYWORDS: Bloom’s: Knowledge 13. Which of the following is a limitation of serial correlation-robust standard errors? a. The serial correlation-robust standard errors are smaller than OLS standard errors when there is serial correlation. b.The serial correlation-robust standard errors can be poorly behaved when there is substantial serial correlation and the sample size is small. c. The serial correlation-robust standard errors cannot be calculated for autoregressive processes of an order greater than one. d.The serial correlation-robust standard errors cannot be calculated after relaxing the assumption of homoskedasticity. ANSWER: b RATIONALE: FEEDBACK: The serial correlation-robust standard errors can be poorly behaved when there is substantial serial correlation and the sample size is small. POINTS: 1 DIFFICULTY: Moderate NATIONAL ST United States - BUSPROG: Analytic ANDARDS: TOPICS: Serial Correlation-Robust Inference after OLS KEYWORDS: Bloom’s: Knowledge 14. Which of the following statements is true? a. Prais-Winsten and Cochrane-Orcutt transformations are consistent when explanatory variables are not strictly exogenous. b.The SC-robust standard errors cannot be estimated in models with lagged dependent variables. c. The SC-robust standard errors work better after quasi-differencing a time series that is expected to be serially correlated. d.Estimation of SC-robust standard errors is independent of the sample size. ANSWER: c RATIONALE: FEEDBACK: The SC-robust standard errors work better after quasi-differencing a time series that is expected to be serially correlated. Quasi-differencing helps limit serial correlation. POINTS: 1 Cengage Learning Testing, Powered by Cognero

Page 5

DIFFICULTY : NATIONAL S TANDARDS: TOPICS: KEYWORDS:

Moderate United States - BUSPROG: Analytic Serial Correlation-Robust Inference after OLS Bloom’s: Knowledge

15. In the time series literature, the serial correlation–robust standard errors are sometimes called: a. homoskedasticity and autocorrelation inconsistent standard errors. b. homoskedasticity and autocorrelation consistent standard errors. c. heteroskedasticity and autocorrelation inconsistent standard errors. d. heteroskedasticity and autocorrelation consistent standard errors. ANSWER: d RATIONALE: FEEDBACK: In the time series literature, the serial correlation–robust

standard errors are sometimes called heteroskedasticity and autocorrelation consistent standard errors. POINTS: DIFFICULTY : NATIONAL S TANDARDS: TOPICS: KEYWORDS:

1 Moderate United States - BUSPROG: Analytic Serial Correlation-Robust Inference after OLS Bloom’s: Knowledge

16. In the presence of heteroskedasticity, the usual OLS estimates of: a. standard errors are valid, whereas the t statistics and F statistics are invalid. b. t statistics are valid, but the standard errors and F statistics are invalid. c. F statistics are valid, but the standard errors and t statistics are invalid. d. standard errors, t statistics, and F statistics are invalid. ANSWER: d RATIONALE: FEEDBACK: In the presence of heteroskedasticity, the usual OLS estimates of standard errors, t statistics, and F statistics are invalid. POINTS: 1 DIFFICULTY: Easy NATIONAL STA United States - BUSPROG: Analytic NDARDS: TOPICS: Heteroskedasticity in Time Series Regression KEYWORDS: Bloom’s: Knowledge 17. Which of the following tests can be used to test for heteroskedasticity in a time series? a. Johansen test b. Dickey-Fuller test c. Breusch-Pagan test d. Durbin’s alternative test ANSWER: c RATIONALE: FEEDBACK: The Breusch-Pagan test can be used to test for Cengage Learning Testing, Powered by Cognero

Page 6

POINTS: DIFFICULTY: NATIONAL STANDA RDS: TOPICS: KEYWORDS:

heteroskedasticicty in a time series. 1 Easy United States - BUSPROG: Analytic Heteroskedasticity in Time Series Regression Bloom’s: Knowledge

2

18. The equation u t = a. ut

0

2

+ 1u t – 1 + vt is an autoregressive model in _____.

b. u2t c. vt d. ut – 1 ANSWER: RATIONALE: POINTS: DIFFICULTY: NATIONAL STANDAR DS: TOPICS: KEYWORDS:

b 2

FEEDBACK: The model u t = 2 model in u t.

0

+

2 1u t – 1

+ vt is an autoregressive

1 Moderate United States - BUSPROG: Analytic Heteroskedasticity in Time Series Regression Bloom’s: Knowledge

19. In presence of serial correlation, the OLS variance formula accurately estimates the true variance of the OLS estimator. a. True b. Fals e ANSWER: False RATIONALE: FEEDBACK: In presence of serial correlation, the OLS variance formula either understates or overstates the true variance of the OLS estimator. POINTS: 1 DIFFICULTY: Easy NATIONAL ST United States - BUSPROG: Analytic ANDARDS: TOPICS: Properties of OLS with Serially Correlated Errors KEYWORDS: Bloom’s: Knowledge 20. Durbin’s alternative test is valid even if the explanatory variables are strictly exogenous. a. True b. Fals e ANSWER: True RATIONALE: FEEDBACK: Durbin’s alternative test is valid even if the explanatory variables are strictly exogenous. POINTS: 1 Cengage Learning Testing, Powered by Cognero

Page 7

DIFFICULTY: NATIONAL STAND ARDS: TOPICS: KEYWORDS:

Easy United States - BUSPROG: Analytic Testing for Serial Correlation Bloom’s: Knowledge

21. Consistency of feasible generalized least square estimators requires the error term to be correlated with lags of the explanatory variable. a. True b. Fals e ANSWER: False RATIONALE: FEEDBACK: Consistency of feasible generalized least square estimators requires the error term to be uncorrelated with lags of the explanatory variable. Correlation will lead to inconsistent estimates. POINTS: 1 DIFFICULTY Easy : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Testing for Serial Correlation KEYWORDS: Bloom’s: Knowledge 22. FGLS estimates are efficient when explanatory variables are not strictly exogenous. a. True b. Fals e ANSWER: False RATIONALE: FEEDBACK: FGLS estimates are inefficient when explanatory variables are not strictly exogenous. POINTS: 1 DIFFICULTY: Easy NATIONAL STANDA United States - BUSPROG: Analytic RDS: TOPICS: Testing for Serial Correlation KEYWORDS: Bloom’s: Knowledge 23. The Cochrane-Orcutt and Prais-Winsten methods are iterative methods of feasible generalized least square (FGLS) estimation. a. True b. Fals e ANSWER: True RATIONALE: FEEDBACK: The Cochrane-Orcutt and Prais-Winsten methods are iterative

methods of feasible generalized least square (FGLS) estimation. POINTS: 1 DIFFICULTY: Easy Cengage Learning Testing, Powered by Cognero

Page 8

NATIONAL ST United States - BUSPROG: Analytic ANDARDS: TOPICS: Correcting for Serial Correlation with Strictly Exogenous Regressors KEYWORDS: Bloom’s: Knowledge 24. In time series regressions, it is advisable to check for serial correlation first, before checking for heteroskedasticity. a. True b. Fals e ANSWER: True RATIONALE: FEEDBACK: Serial correlation invalidates heteroskedasticity tests. Hence, it is advisable to check for serial correlation first, before checking for heteroskedasticity in time series regressions. POINTS: 1 DIFFICULTY Easy : NATIONAL S United States - BUSPROG: Analytic TANDARDS: TOPICS: Heteroskedasticity in Time Series Regression KEYWORDS: Bloom’s: Knowledge 25. The serial correlation–robust standard errors are typically larger than the usual OLS standard errors when

there is serial correlation. a. True b. Fals e ANSWER: True RATIONALE: FEEDBACK: The serial correlation–robust standard errors are typically

larger than the usual OLS standard errors when there is serial correlation. POINTS: DIFFICULTY : NATIONAL S TANDARDS: TOPICS: KEYWORDS:

1 Moderate United States - BUSPROG: Analytic Serial Correlation-Robust Inference after OLS Bloom’s: Comprehension

Cengage Learning Testing, Powered by Cognero

Page 9...