Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 2

Decide if you agree or disagree with each of the following statements and give a brief explanation of your decision:

(i) Like cross-sectional observations, we can assume that most time series observations are independently distributed.

(ii) The OLS estimator in a time series regression is unbiased under the first three Gauss-Markov assumptions.

(iii) A trending variable cannot be used as the dependent variable in multiple regression analysis.

(iv) Seasonality is not an issue when using annual time series observations.

Step 1 of 4

(i)

Most time series observations are correlated over time, unlike cross-sectional observations. There may be a natural trend or a common tendency of growing over time in the time series data.

Hence, one should disagree with the statement which states that “Like cross-sectional observations, we assume that most time series observations are independently distributed”