Heteroskedasticity- and autocorrelation-consistent standard errors
A)result in the OLS estimator being BLUE.
B)should be used when errors are autocorrelated.
C)are calculated when using the Cochrane-Orcutt iterative procedure.
D)have the same formula as the heteroskedasticity robust standard errors in cross-sections.

Question

Quizplus · Accepted Answer

Heteroskedasticity- and autocorrelation-consistent standard errors are specifically designed to be used when errors are autocorrelated, hence option B is the correct choice. Option A is incorrect as the usage of the standard errors does not necessarily imply the OLS estimator is BLUE. Option C is incorrect because Cochrane-Orcutt is a procedure used to deal with autocorrelation, but it does not calculate heteroskedasticity- and autocorrelation-consistent standard errors. Option D is incorrect because the formula for heteroskedasticity robust standard errors in cross-sections does not account for autocorrelation, which is the primary purpose of the current standard errors.

Heteroskedasticity- and Autocorrelation-Consistent Standard Errors