Misspecification of functional form of the regression function
A) is overcome by adding the squares of all explanatory variables.
B) is more serious in the case of homoskedasticity-only standard error.
C) results in a type of omitted variable bias.
D) requires alternative estimation methods such as maximum likelihood.
Question 2
It is advisable to use clustered standard errors in panel regressions because
A) without clustered standard errors, the OLS estimator is biased
B) hypothesis testing can proceed in a standard way even if there are few entities (n is small)
C) they are easier to calculate than homoskedasticity-only standard errors
D) the fixed effects estimator is asymptotically normally distributed when n is large
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