Quant CFAI EOC 21 pg 378 included, standard, errors, already, one

mkytz15

In one of the questions,
1. " Conditional Heteroskedasticity will result in consistent coefficient estimates but both
the t-stastics and F-statistics will be biased" resulting in False Inferences

2. If an omitted variable is correlated with variables already included in the model, coefficient estimates will be biased and incosistent and standard errors will also be inconsistent"


For Q1. We have probably come across zillion times that if there is a conditional heteroskedasticity then standard errors will be small and t-statistics will be high and biased F-statistics also. But the interesting thing is, the answer says the standard erros could be up or down? Does this make sense

For Q2. Once you omit the correlated variable, why would they be any errors. May be I am intrepreting the question wrong.

Thanks again



Edited 1 time(s). Last edit at Sunday, May 30, 2010 at 05:57PM by drk.