Question: When the errors in a regression model have AR(1) serial correlation, why do the OLS standard errors tend to underestimate the sampling variation in the

When the errors in a regression model have AR(1) serial correlation, why do the OLS standard errors tend to underestimate the sampling variation in the j? Is it always true that the OLS standard errors are too small?

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We can reason this from equation 124 because the usual OLS standard error ... View full answer

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