Question

1.Running the following regression model: where Yt and Xt are both non-stationary variables. Which of the following statements is TRUE?

a. This necessarily leads to spurious results without exception

b. The Durbin-Watson d statistic will be larger than the R2

c. Including a dummy variable in the regression specification will provide meaningful results

2.A researcher might be alerted to the presence of multicollinearity by which of the following:

a. High values of the estimated slope coefficients

b. A very low value of the Durbin-Watson statistic

c. High values for the F-statistic and R2 and insignificant or very low values of the t statistics

d. Low values for the F-statistic and R2 and significant or high values of the t-statistics

3.Using the Ordinary Least Squares (OLS) in the presence of autocorrelation will result in the following except:

a. Linear, unbiased and consistent estimates

b. Overestimation of the R2

c. Inaccurate estimate of the residual variance, alpha square

d. Estimates with the minimum variances

d. Differencing both variables may provide meaningful results but could lose some useful information

Answer 1

ANS:

1.Running the following regression model: where Yt and Xt are both non-stationary variables. Which of the following statements is TRUE?

a. This necessarily leads to spurious results without exception.

2.A researcher might be alerted to the presence of multicollinearity by which of the following:

c. High values for the F-statistic and R2 and insignificant or very low values of the t statistics.

3.Using the Ordinary Least Squares (OLS) in the presence of autocorrelation will result in the following except:

d. Differencing both variables may provide meaningful results but could lose some useful information