HAC standard errors should be used because
A)they are convenient simplifications of the heteroskedasticity-robust standard errors.
B)conventional standard errors may result in misleading inference.
C)they are easier to calculate than the heteroskedasticity-robust standard errors and yet still allow you to perform inference correctly.
D)when there is a structural break, then conventional standard errors result in misleading inference.

Question

Quizplus · Accepted Answer

Conventional standard errors may assume homoscedasticity, leading to misleading inference when the data is actually heteroskedastic. HAC standard errors address this issue by allowing for the possibility of heteroskedasticity in the data.

HAC Standard Errors Should Be Used Because