Scribd Logo
Upload

Welcome to Scribd!

  • Topic: HETEROSCEDASTICITY: What Happens If The Error Variance Is Nonconstant ?

    Uploaded by

    shahnewaz hossain
    23 views7 pages
    This document discusses heteroscedasticity, which occurs when the error variance is non-constant in a classical linear regression model. It has consequences such as the OLS estimators remaining unbiased but no longer having minimum variance. The document outlines methods to detect heteroscedasticity such as graphical examination, Park test, Glejser test, and White's general test. Remedial measures discussed include weighted least squares when the error variance is known and respecifying the model when it is unknown.

    Original Description:

    the document covers all the aspects of heteroscedasticity

    Original Title

    17066 heteroscedasticity

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document discusses heteroscedasticity, which occurs when the error variance is non-constant in a classical linear regression model. It has consequences such as the OLS estimators remaining unbiased but no longer having minimum variance. The document outlines methods to detect heteroscedasticity such as graphical examination, Park test, Glejser test, and White's general test. Remedial measures discussed include weighted least squares when the error variance is known and respecifying the model when it is unknown.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    23 views7 pages

    Topic: HETEROSCEDASTICITY: What Happens If The Error Variance Is Nonconstant ?

    Uploaded by

    shahnewaz hossain
    This document discusses heteroscedasticity, which occurs when the error variance is non-constant in a classical linear regression model. It has consequences such as the OLS estimators remaining unbiased but no longer having minimum variance. The document outlines methods to detect heteroscedasticity such as graphical examination, Park test, Glejser test, and White's general test. Remedial measures discussed include weighted least squares when the error variance is known and respecifying the model when it is unknown.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 7

    Topic:

    HETEROSCEDASTICITY: What happens


    If the error variance is nonconstant ?

    Presented by:Mohammad
    Shahnewaz Hossain
    ID:17066

    Nature of heteroscedasticity
    An important assumption of CLRM

    E(ui)= 2
    If E(ui) 2, the situation known as

    heteroscedastic
    - found in cross-sectional data
    - scale effect

    Consequences of heteroscadesticity
    OLS estimators

    -linear
    -unbiased
    - no longer minimum variance
    2=e2/d.f (biased)
    Unreliable t and F distribution

    Detection of
    heteroscedasticity
    Nature of the problem
    Graphical examination of residuals

    Park test

    ln 2i = 1 + 2 ln Xi + vi
    Glejser test

    ei = 1 + 2 Xi + vi
    ei = 1 + 2 Xi + vi
    ei = 1 + 2 1/Xi + vi

    Whites general test heteroscedasricity

    test
    -run the original regression model and
    obtain the residuals
    - run the following auxiliary
    regression

    ei2=A 1 +A 2
    X2i+A3X3i+A4X22+A5X23i+A6X2iX3i+Vi
    -n.R2x2k-1

    Remedial measures
    When 2i known

    - weighted least squares method


    When 2i unknown
    -the error variance proportional to
    xi
    - the error variance proportional to
    x2i
    Respecification of the model

    You might also like