Which of the following statements is true?
A)The calculated t statistic is valid and efficient in case of a spurious regression.
B)If an explanatory variable or a dependent variable is integrated of the order one, the OLS estimators are asymptotically normally distributed.
C)An error correction model can be used to study the short-run dynamics in the relationship between the dependent variable and the explanatory variables in a time series model.
D)The Dickey-Fuller test can be used to test for heteroskedasticity in the error terms.

Question

Quizplus · Accepted Answer

An error correction model is specifically designed to study short-run dynamics in time series models by including a lagged difference term of the dependent variable. The other statements are incorrect. A) The t statistic is not reliable in case of spurious regression because of the low R-squared and high standard error. B) If an explanatory variable or dependent variable is integrated of the order one, it implies a unit root, and the OLS estimators will not be normally distributed. D) The Dickey-Fuller test is used to test for the presence of a unit root in a time series, not heteroskedasticity.

Which of the Following Statements Is True