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.

Question

Quizplus · Accepted Answer

Serial correlation-robust standard errors can become unreliable when the sample size is small and there is significant serial correlation present. Option A is incorrect as the standard errors are generally larger. Option C is incorrect as these standard errors can typically be calculated for higher-order autoregressive processes. Option D is incorrect as serial correlation-robust standard errors can accommodate heteroskedasticity.

Which of the Following Is a Limitation of Serial Correlation-Robust