- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Model Misspecification
- Subject 2. Heteroskedasticity
CFA Practice Question
In regression with financial data, the most likely result of heteroskedasticity is that the estimated standard errors will too ______ and the t-statistic will be too ______.
II. large, small
III. small, small
IV. large, large
I. small, large
II. large, small
III. small, small
IV. large, large
Correct Answer: I
The standard errors will be too small, causing the t-statistics to be large (appearing statistically significant).
User Contributed Comments 2
| User | Comment |
|---|---|
| PhiWong | Consistent with question 4. |
| nsmwaura | Leading to Type 1 error(Rejecting null hypothesis while its true) |