The presence of correlated error terms creates problems for inference based on OLS. These can be overcome by
A)using HAC standard errors.
B)using heteroskedasticity-robust standard errors.
C)reordering the observations until the correlation disappears.
D)using homoskedasticity-only standard errors.

Question

Quizplus · Accepted Answer

Using HAC (Heteroskedasticity and Autocorrelation Consistent) standard errors can address the issue of correlated error terms, as they adjust for both heteroskedasticity and autocorrelation.

The Presence of Correlated Error Terms Creates Problems for Inference