A study based on OLS regressions is internally valid if
A)the errors are homoskedastic, and there are no more than two binary variables present among the regressors.
B)you use a two-sided alternative hypothesis, and standard errors are calculated using the heteroskedasticity-robust formula.
C)weighted least squares produces similar results, and the t-statistic is normally distributed in large samples.
D)the OLS estimator is unbiased and consistent, and the standard errors are computed in a way that makes confidence intervals have the desired confidence level.

Question

Quizplus · Accepted Answer

Internal validity of an OLS regression depends on the unbiasedness and consistency of the estimator, and the standard errors being computed correctly. Choice A refers to assumptions for heteroskedasticity, and binary variables do not necessarily affect internal validity. Choice B refers to the hypothesis testing framework, and the robust standard errors only address potential heteroskedasticity. Choice C refers to an alternative estimation method (WLS) and the t-statistic distribution, neither of which are directly related to internal validity.

A Study Based on OLS Regressions Is Internally Valid If