The test for overidentifying restrictions is valid if _____.
A)the regression model exhibits heteroskedasticity
B)the regression model exhibits homoskedasticity
C)the number of instrumental variables are less than the number of endogenous explanatory variables
D)the number of instrumental variables are just enough for obtaining consistent estimators

Question

Quizplus · Accepted Answer

The test for overidentifying restrictions is valid under the assumption of homoskedasticity. This condition ensures that the standard errors of the estimates are correctly specified, allowing for the proper functioning of the test.

The Test for Overidentifying Restrictions Is Valid If _____