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Normality Test: Rsandp Rsandp
Normality Test: Rsandp Rsandp
1. Regression
2. Normality Test
70
Series: Residuals
60 Sample 1986M04 2013M04
Observations 325
50
Mean 5.52e-17
40
Median -0.014928
30 Maximum 0.916137
Minimum -1.590777
20 Std. Dev. 0.295021
Skewness -0.308129
10 Kurtosis 6.127951
0 Jarque-Bera 137.6355
-1.5 -1.0 -0.5 0.0 0.5 1.0
Probability 0.000000
Hypothesis
1.0
-0.5
In conclusion, since we reject H0, so there is
not normal distribution.
-1.0
b.
-1.5
-2.0
-30 -20 -10 0 10 20
RSANDP
There seems to be a pattern for the residuals. This might indicate the presence of heteroscedasticity.
Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 10/30/20 Time: 12:24
Sample: 1986M04 2013M04
Included observations: 325
Hypothesis
Reject H0
Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 10/30/20 Time: 12:27
Sample: 1986M04 2013M04
Included observations: 325
Collinear test regressors dropped from specification
White’s Test
Hypothesis
Reject H0
Compared with a, this means that one of our assumptions of our linear regression model has been
violated.
d) Coefficients stay the same but standard errors have been corrected.
Dependent Variable: INFLATION
Method: Least Squares
Date: 10/30/20 Time: 12:40
Sample (adjusted): 1986M04 2013M04
Included observations: 325 after adjustments
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard
errors and covariance
e) Other than White’s robust formula, we could have used Weighted Least Squares (WLS) to remove
the heteroscedasticity. This may provide us with a better estimator. Other than that, we can
transform the variables into log or by reducing measures in ‘size’