If a "break" occurs in the population regression function, then
A)inference and forecasting are compromised when neglecting it.
B)an Augmented Dickey Fuller test, rather than the Dickey Fuller test, should be used to test for stationarity.
C)this suggests the presence of a deterministic trend in addition to a stochastic trend.
D)forecasting, but not inference, is unaffected, if the break occurs during the first half of the sample period.

Question

Quizplus · Accepted Answer

A break in the population regression function indicates a change in the relationship between the variables, which can affect both inference and forecasting. Neglecting the break can lead to inaccurate results in both cases.

If a "Break" Occurs in the Population Regression Function, Then