If OLS is used in the presence of heteroscedasticity, which of the following will be likely consequences?
(I) Coefficient estimates may be misleading
(ii) Hypothesis tests could reach the wrong conclusions
(iii) Forecasts made from the model could be biased
(iv) Standard errors may inappropriate
A) (ii) and (iv) only
B) (i) and (iii) only
C) (i), (ii), and (iii) only
D) (i), (ii), (iii), and (iv).

Question

Quizplus · Accepted Answer

Heteroscedasticity affects the standard errors, making hypothesis tests potentially incorrect, but it does not bias the coefficient estimates or forecasts.

If OLS Is Used in the Presence of Heteroscedasticity, Which