Which of the following is a consequence of failing to use a $\rho$-transformed model when errors are correlated?
A) Produces biased coefficient estimates.
B) Produces incorrect standard errors.
C) Produces coefficient estimates that cannot be interpreted.
D) Produces consistent coefficient estimates.

Question

Quizplus · Accepted Answer

Using a model that does not account for correlated errors, such as not applying a transformation when needed, results in incorrect standard errors. This is because the standard errors are calculated under the assumption of independence between errors, which is violated when errors are correlated.

Which of the Following Is a Consequence of Failing to Use