Deck 9: More on Specification and Data Problems

Question 1

Which of the following is a test of nonnested models?​

A)​Davidson-MacKinnon test
B)​Standard F test
C) ​Regression Specification Error Test
D) White test

Answer 1

A
Explanation: The Davidson-MacKinnon test is one of the tests used for the test of nonnested models.​

Question 2

An explanatory variable is called exogenous if it is correlated with the error term.

Answer 2

False
Explanation: An explanatory variable is called endogenous if it is correlated with the error term.

Question 3

Sample selection based on the dependent variable is called _____.

A)random sample selection
B)endogenous sample selection
C) exogenous sample selection
D) stratified sample selection

Answer 3

B
Explanation: Sample selection based on the dependent variable is called endogenous sample selection.

Question 4

Which of the following assumptions is needed for the plug-in solution to the omitted variables problem to provide consistent estimators?

A)The error term in the regression model exhibits heteroskedasticity.
B)The error term in the regression model is uncorrelated with all the independent variables.
C) The proxy variable is uncorrelated with the dependent variable.
D) The proxy variable has zero conditional mean.

Question 5

Which of the following is true?

A)A functional form misspecification can occur if the level of a variable is used when the logarithm is more appropriate.
B)A functional form misspecification occurs only if a key variable is uncorrelated with the error term.
C) A functional form misspecification does not lead to biasedness in the ordinary least squares estimators.
D) A functional form misspecification does not lead to inconsistency in the ordinary least squares estimators.

Question 6

A complete cases estimator is an estimator that uses: only observations with a complete set of data on y and x₁, ..., x_k

A)only observations with a complete set of data on x₁, ..., xk.
B)complete information about the residuals.
C) only observations with a complete set of data on y and x₁, ..., xk.
D) complete information about the outliers.

Question 7

A regression model suffers from functional form misspecification if _____.

A)a key variable is binary.
B)the dependent variable is binary.
C) an interaction term is omitted.
D) the coefficient of a key variable is zero.

Question 8

Which of the following is true of Regression Specification Error Test (RESET)?

A)It tests if the functional form of a regression model is misspecified.
B)It detects the presence of dummy variables in a regression model.
C) It helps in the detection of heteroskedasticity when the functional form of the model is correctly specified.
D) It helps in the detection of multicollinearity among the independent variables in a regression model.

Question 9

Which of the following is a difference between least absolute deviations (LAD) and ordinary least squares (OLS) estimation?

A)OLS is more computationally intensive than LAD.
B)OLS is more sensitive to outlying observations than LAD.
C) OLS is justified for very large sample sizes while LAD is justified for smaller sample sizes.
D) OLS is designed to estimate the conditional median of the dependent variable while LAD is designed to estimate the conditional mean.

Question 10

The classical errors-in-variables (CEV) assumption is that _____.

A)the error term in a regression model is correlated with all observed explanatory variables
B)the error term in a regression model is uncorrelated with all observed explanatory variables
C) the measurement error is correlated with the unobserved explanatory variable
D) the measurement error is uncorrelated with the unobserved explanatory variable

Question 11

A proxy variable _____.

A)increases the error variance of a regression model
B)cannot contain binary information
C) is used when data on a key independent variable is unavailable
D) is detected by running the Davidson-MacKinnon test

Question 12

The method of data collection in which the population is divided into nonoverlapping, exhaustive groups is called _____.

A)random sampling
B)stratified sampling
C) endogenous sampling
D) exogenous sampling

Question 13

Consider the following equation for household consumption expenditure: Consmptn= ₀+ ₁Inc + ₂Consmptn_-1+ u
Where 'Consmptn' measures the monthly consumption expenditure of a household, 'Inc' measures household income and 'Consmptn_-1' is the consumption expenditure in the previous month. Consmptn_-1 is a _____ variable.

A)exogenous
B)binary variable
C) lagged dependent
D) proxy variable

Question 14

Which of the following is true of measurement error?

A)If measurement error in a dependent variable has zero mean, the ordinary least squares estimators for the intercept are biased and inconsistent.
B)If measurement error in an independent variable is uncorrelated with the variable, the ordinary least squares estimators are unbiased.
C) If measurement error in an independent variable is uncorrelated with other independent variables, all estimators are biased.
D) If measurement error in a dependent variable is correlated with the independent variables, the ordinary least squares estimators are unbiased.

Question 15

A measurement error occurs in a regression model when _____.

A)the observed value of a variable used in the model differs from its actual value
B)the dependent variable is binary
C) the partial effect of an independent variable depends on unobserved factors
D) the model includes more than two independent variables

Question 16

Which of the following types of sampling always causes bias or inconsistency in the ordinary least squares estimators?

A)Random sampling
B)Exogenous sampling
C) Endogenous sampling
D) Stratified sampling

Question 17

How many new variables should be created for a multiple regression model where data are always available for y and x₁, x₂, ..., x_k−1 but are sometimes missing for the explanatory variable x_k?

A)​One variable
B)​Two variables
C) ​Three variables
D) ​Four variables

Question 18

A multiple regression model suffers from functional form misspecification when it does not properly account for the relationship between the dependent and the observed explanatory
variables.

Question 19

Which of the following is a drawback of including proxy variables in a regression model?

A)It leads to misspecification analysis.
B)It reduces the error variance.
C) It increases the error variance.
D) It exacerbates multicollinearity.

Question 20

Consider the following regression model: log(y) = 0 + ₁x₁ + ₂x₁² + ₃x₃ + u. This model will suffer from functional form misspecification if _____.

A) ₀ is omitted from the model
B)u is heteroskedastic
C) x₁² is omitted from the model
D) x₃ is a binary variable

Question 21

The Least Absolute Deviations (LAD) estimators in a linear model minimize the sum of squared residuals.

Question 22

Studentized residuals are obtained from the original OLS residuals by dividing them by an estimate of their standard deviation.

Question 23

If the data are missing at random, then the missing data do not cause any statistical problems.​

Question 24

The measurement error is the difference between the actual value of a variable and its reported value.

Question 25

One of the assumptions for the plug-in solution to provide consistent estimators of β₁ and β₂ is that the error u is uncorrelated with all the independent variables.
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