The t-statistic is calculated by dividing
A)the OLS estimator by its standard error.
B)the slope by the standard deviation of the explanatory variable.
C)the estimator minus its hypothesized value by the standard error of the estimator.
D)the slope by 1.96.

Question

Quizplus · Accepted Answer

The t-statistic is a measure of how many standard errors the OLS estimator is away from its hypothesized value. It is calculated by dividing the estimator minus its hypothesized value by the standard error of the estimator. Option A is incorrect because it only calculates the standard deviation of the estimator. Option B is incorrect because it divides the slope by the standard deviation of the explanatory variable instead of the standard error of the estimator. Option D is incorrect because it divides the slope by a fixed value of 1.96, which is only true when the sample size is large and the distribution is normal.

The T-Statistic Is Calculated by Dividing