Serial Correlation Part 1 Which of the following are consequences of pure serial

ID: 3252520 • Letter: S

Question

Serial Correlation

Part 1

Which of the following are consequences of pure serial correlation? (Check all that apply.)

a. OLS is no longer the minimum variance estimator.

b. Biased coefficient estimates

c. Biased OLS estimates of the standard errors of the coefficients.

d. Unexpected signs of the coefficient estimates.

e. Inconsistent estimates of the regression coefficients

Part 2

Which of the following statements about impure serial correlation are correct? (Check all that apply.)

a. It is caused by the underlying distribution of the error term of the true specification of an equation.

b. It may be a result of an omitted variable.

c. The best remedy for impure serial correlation is to use GLS.

d. It may be a consequence of an incorrect functional from.

Part 3

Which of the following conditions must be met in order to use the Durbin-Watson test properly? (Check all that apply.)

a. The regression model does not include a lagged dependent variable as an independent variable.

b. The serial correlation is positive.

c. The serial correlation is first-order.

d. The sample includes at least 30 observations.

e. The regression model includes a constant term.

Solutions:

1) a. OLS is no longer the minimum variance estimator.

2) b. It may be a result of an omitted variable.

3) a. The regression model does not include a lagged dependent variable as an independent variable

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