Econometrics

In a panel data model, fixed effects estimation is preferred over random effects estimation when the unobserved individual effects are correlated with the explanatory variables.

True

False

Heteroscedasticity in the residuals of a regression model indicates that the variance of the errors is constant across observations.

True

False

What does the Gauss-Markov theorem guarantee about OLS estimators?

A) They are always biased and inconsistent.

B) They have the minimum variance among all unbiased linear estimators.

C) They are the most computationally intensive estimators.

D) They always require data to be normally distributed.

Which of the following is a characteristic of autocorrelation in time series data?

A) It refers to a relationship between two variables across different time periods.

B) It implies that past values of a variable are not related to its future values.

C) It is desirable and indicates that a model is well-specified.

D) It can lead to inefficient estimates and misleading standard errors.

What is the primary purpose of conducting a Unit Root Test in time series analysis?

A) To determine the optimal number of lags in a model.

B) To test the stationarity of a time series.

C) To identify the presence of cointegration between two series.

D) To estimate the coefficients of a regression model.

What does the concept of cointegration refer to?

A) Two or more time series are not related to each other in the long term.

B) Two or more non-stationary time series have a stationary linear combination.

C) The error terms of a model are correlated with each other.

D) A single time series follows a random walk process.

Which test is used to detect the presence of heteroscedasticity in a regression model?

A) Chow test

B) Durbin-Watson test

C) Breusch-Pagan test

D) Augmented Dickey-Fuller test

The Ramsey RESET test is primarily used for checking:

A) The correct functional form of the model.

B) The stationarity of the residuals.

C) The presence of autocorrelation in residuals.

D) Multicollinearity among independent variables.

What does the term 'Endogeneity' refer to in the context of regression analysis?

A) The condition where the explanatory variables are perfectly correlated.

B) The scenario where one or more independent variables are correlated with the error term.

C) The use of lagged dependent variables as independent variables.

D) The absence of a linear relationship between the dependent and independent variables.

Which of the following best describes the 'Panel Data' model?

A) Data collected at a single point in time across multiple subjects.

B) Time-series data for a single entity collected over various periods.

C) Data that combines cross-sectional and time-series data for multiple entities over multiple periods.

D) An analytical method that exclusively uses time-series data to predict future trends.

Dummy variables are used in regression analysis to represent categorical data and can only take on the value of 0 or 1.

True

False

In the context of time-series analysis, 'Stationarity' implies that the mean and variance of the series are constant over time and do not depend on the time at which the series is observed.

True

False

What does an AR(1) process model in time series analysis?

A) The correlation of a variable with itself across two adjacent time periods.

B) The variance of a variable changing over time in a predictable pattern.

C) The relationship between two different variables over time.

D) The overall trend of a variable over a long period.

Which model is specifically designed to handle the issue of autocorrelation in the residuals of a regression model?

A) OLS model

B) Dummy variable model

C) ARCH model

D) Fixed effects model

What is the purpose of using the Chow test in econometrics?

A) To test for the presence of autocorrelation.

B) To check for heteroscedasticity in the residuals.

C) To determine if there is a structural break in the data.

D) To assess the fitness of a linear regression model.

Which of the following best describes 'Pooled OLS' in panel data analysis?

A) It treats panel data as a single large cross-section, ignoring any time-series properties.

B) It averages the OLS estimates from each individual time series.

C) It applies OLS separately to each cross-sectional unit.

D) It accounts for both fixed effects and random effects.

The Hausman test is used to:

A) Decide between using a fixed effects or random effects model.

B) Test for the presence of unit roots in a time series.

C) Determine if variables in a regression model are cointegrated.

D) Check for autocorrelation in panel data.

Which test is typically used to detect stationarity in a time series?

A) Chow test

B) F-test

C) Augmented Dickey-Fuller (ADF) test

D) Hausman test

The Gauss-Markov theorem applies only to linear regression models with normally distributed error terms.

True

False

Robust standard errors are an effective remedy for heteroscedasticity in regression models.

True

False

Multicollinearity significantly reduces the efficiency of OLS estimators.

True

False

In panel data analysis, time fixed effects are used to control for variables that change over time but are constant across entities.

True

False

Cointegration tests are used to determine the optimal number of lags in a VAR model.

True

False

A high R-squared value always indicates that a regression model has a good fit to the data.

True

False

Econometrics

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