CEA Quantitative Analysis and Econometrics 4

Question 1

The Gauss-Markov theorem guarantees that OLS estimators are BLUE. What does BLUE stand for?

Accepted Answer

Best (minimum variance) Linear Unbiased Estimators

Answer

Under the Gauss-Markov assumptions, OLS produces the Best (minimum variance) Linear Unbiased Estimator among all linear unbiased estimators.

Question 2

When the White test for heteroscedasticity is significant, the recommended correction is typically:

Accepted Answer

Use heteroscedasticity-robust (White) standard errors

Answer

White's heteroscedasticity-consistent standard errors correct inference without requiring knowledge of the specific form of heteroscedasticity.

Question 3

In a difference-in-differences (DiD) design, the key identifying assumption is:

Accepted Answer

Treatment and control groups would have followed parallel trends absent treatment

Answer

The parallel trends assumption states that without the intervention, the treated and control groups would have changed by the same amount over time.

Question 4

A regression F-statistic for joint significance has a p-value of 0.32. The correct interpretation is:

Accepted Answer

The predictors jointly fail to explain significant variation in the outcome

Answer

A p-value of 0.32 exceeds conventional significance levels, so we fail to reject the null hypothesis that all slope coefficients are simultaneously zero.

Question 5

Which forecasting error measure is most appropriate for comparing models applied to variables with different scales or units?

Accepted Answer

Mean Absolute Percentage Error (MAPE)

Answer

MAPE expresses errors as a percentage of actual values, making it scale-independent and suitable for comparing forecast accuracy across differently-scaled variables.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Quantitative Analysis and Econometrics 4