ECON3395 Ch12 (Serial Correlation and Heteroskedasticity in Time Series Regressions) Practice
1. The serial correlation–robust standard errors are typically larger than the usual OLS standard errors
when there is serial correlation.
a. True
b. False
2. 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.
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.
4. Which of the following is a test for serial correlation in the error terms?
a. Breusch-Pagan test
b. Dickey Fuller test
c. Durbin Watson test
d. White test
5. In the presence of serial correlation:
a. estimated standard errors remain valid.
b. estimated test statistics remain valid.
c. estimated OLS values are not BLUEs.
d. estimated variance does not differ from the case of no serial correlation.
6. 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.
7. 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
8. Which of the following is INCORRECT?
a. If DW is less than dL, there is serial correlation in the residuals.
b. If DW is greater than dU, there is no serial correlation in the residuals.
c. DW is particularly useful in cross-section data.
d. Breusch-Godfrey test is a statistical test used to detect higher-order autocorrelation.
Answer Key
1. True, 2. B, 3. A, 4. C, 5. C, 6. D, 7. C, 8. C