Discussion
In the presence of Heteroscedasticity, which of the following is not a correct statement ?
Answer: B
The statement that is not correct under heteroscedasticity is that the OLS estimators are of minimum variance or efficient. With non-constant error variance the OLS estimators remain unbiased and consistent, which is option A, but they are no longer efficient, because weighted least squares gives estimators with smaller variance. So option C is a true statement, and the usual t and F tests may mislead because the formulas for standard errors assume constant variance, which is option D. Option B is the false one.
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