ECS4863 Advanced Econometrics Exam Questions and
Answers | 100 Practice Questions with Detailed Rationales |
Complete Revision Guide A+ pass
1. Which assumption of the classical linear regression model requires that the
relationship between the dependent and independent variables is linear in
parameters?
A. Homoscedasticity
B. Linearity
C. Normality
D. Independence
Rationale: Linearity means the model is linear in the unknown parameters,
allowing estimation using OLS.
2. Which estimator is considered BLUE under the Gauss-Markov assumptions?
A. Maximum Likelihood Estimator
B. Instrumental Variable Estimator
C. Ordinary Least Squares (OLS) Estimator
D. Generalized Method of Moments Estimator
Rationale: OLS is the Best Linear Unbiased Estimator when the Gauss-Markov
assumptions hold.
3. The primary objective of econometrics is to:
A. Eliminate uncertainty in economics.
B. Develop accounting standards.
C. Quantify and test economic relationships using statistical methods.
D. Replace economic theory.
Rationale: Econometrics combines economic theory, mathematics, and statistics to
estimate and test relationships.
4. Which measure indicates the proportion of variation in the dependent
variable explained by the regression model?
, A. Standard error
B. F-statistic
C. R-squared
D. Durbin-Watson statistic
Rationale: R² measures the explanatory power of the regression model.
5. Multicollinearity primarily affects:
A. Unbiasedness of OLS estimates
B. Precision of coefficient estimates
C. Sample size
D. Functional form
Rationale: Multicollinearity inflates standard errors, reducing statistical precision.
6. Which test is commonly used to detect heteroskedasticity?
A. Durbin-Watson Test
B. Chow Test
C. Breusch-Pagan Test
D. Jarque-Bera Test
Rationale: The Breusch-Pagan test evaluates whether error variance is constant.
7. A dummy variable typically represents:
A. Continuous data
B. Time-series observations
C. Qualitative or categorical information
D. Measurement error
Rationale: Dummy variables encode categorical characteristics using 0 and 1.
8. Which assumption requires the expected value of the error term to be
zero?
A. Stationarity
B. Zero Conditional Mean
C. Homogeneity
D. Cointegration
, Rationale: This assumption ensures unbiased parameter estimation.
9. Autocorrelation is most commonly associated with:
A. Cross-sectional data
B. Experimental data
C. Time-series data
D. Survey sampling
Rationale: Serial dependence is primarily a feature of time-series observations.
10.Which statistic is commonly used to detect first-order autocorrelation?
A. White Statistic
B. Durbin-Watson Statistic
C. Breusch-Pagan Statistic
D. Jarque-Bera Statistic
Rationale: The Durbin-Watson statistic measures first-order serial correlation.
11.A stationary time series has:
A. Increasing variance
B. Changing mean
C. Constant mean and variance over time
D. Perfect trend
Rationale: Stationarity requires stable statistical properties.
12.Which test is widely used to detect a unit root?
A. Chow Test
B. RESET Test
C. Augmented Dickey-Fuller Test
D. Wald Test
Rationale: The ADF test is the standard approach for testing stationarity.
13.Cointegration implies that:
A. Variables are stationary individually.
B. A long-run equilibrium relationship exists among non-stationary
variables.
Answers | 100 Practice Questions with Detailed Rationales |
Complete Revision Guide A+ pass
1. Which assumption of the classical linear regression model requires that the
relationship between the dependent and independent variables is linear in
parameters?
A. Homoscedasticity
B. Linearity
C. Normality
D. Independence
Rationale: Linearity means the model is linear in the unknown parameters,
allowing estimation using OLS.
2. Which estimator is considered BLUE under the Gauss-Markov assumptions?
A. Maximum Likelihood Estimator
B. Instrumental Variable Estimator
C. Ordinary Least Squares (OLS) Estimator
D. Generalized Method of Moments Estimator
Rationale: OLS is the Best Linear Unbiased Estimator when the Gauss-Markov
assumptions hold.
3. The primary objective of econometrics is to:
A. Eliminate uncertainty in economics.
B. Develop accounting standards.
C. Quantify and test economic relationships using statistical methods.
D. Replace economic theory.
Rationale: Econometrics combines economic theory, mathematics, and statistics to
estimate and test relationships.
4. Which measure indicates the proportion of variation in the dependent
variable explained by the regression model?
, A. Standard error
B. F-statistic
C. R-squared
D. Durbin-Watson statistic
Rationale: R² measures the explanatory power of the regression model.
5. Multicollinearity primarily affects:
A. Unbiasedness of OLS estimates
B. Precision of coefficient estimates
C. Sample size
D. Functional form
Rationale: Multicollinearity inflates standard errors, reducing statistical precision.
6. Which test is commonly used to detect heteroskedasticity?
A. Durbin-Watson Test
B. Chow Test
C. Breusch-Pagan Test
D. Jarque-Bera Test
Rationale: The Breusch-Pagan test evaluates whether error variance is constant.
7. A dummy variable typically represents:
A. Continuous data
B. Time-series observations
C. Qualitative or categorical information
D. Measurement error
Rationale: Dummy variables encode categorical characteristics using 0 and 1.
8. Which assumption requires the expected value of the error term to be
zero?
A. Stationarity
B. Zero Conditional Mean
C. Homogeneity
D. Cointegration
, Rationale: This assumption ensures unbiased parameter estimation.
9. Autocorrelation is most commonly associated with:
A. Cross-sectional data
B. Experimental data
C. Time-series data
D. Survey sampling
Rationale: Serial dependence is primarily a feature of time-series observations.
10.Which statistic is commonly used to detect first-order autocorrelation?
A. White Statistic
B. Durbin-Watson Statistic
C. Breusch-Pagan Statistic
D. Jarque-Bera Statistic
Rationale: The Durbin-Watson statistic measures first-order serial correlation.
11.A stationary time series has:
A. Increasing variance
B. Changing mean
C. Constant mean and variance over time
D. Perfect trend
Rationale: Stationarity requires stable statistical properties.
12.Which test is widely used to detect a unit root?
A. Chow Test
B. RESET Test
C. Augmented Dickey-Fuller Test
D. Wald Test
Rationale: The ADF test is the standard approach for testing stationarity.
13.Cointegration implies that:
A. Variables are stationary individually.
B. A long-run equilibrium relationship exists among non-stationary
variables.
