Unit Root Test

Time series it must be stationary

Time series trend upward or downward (it does not reach max point)
Then coefficients will not tell true value
To check prob = 0.000 at Level or 1st Difference
Heteroscedasticity
Error term –
Mean, Variance, Co-variance should be constant
If not constant then regression line will not be show true data, THE DATA WOULD
BE HETEROGENEOUS
Run HAC-TEST to make it constant, THE DATA WOULD BECOME HOMOGENEOUS,
because it minimizes error term. Make the plotted data points closer to the
regression line
Autocorrelation
Error Term should not be consistent
Eg. Same mistake every time is not mistake it is a Habit
Against the human nature to minimize error too much
Prob<
Mistake should be random
+ve auto correlation = Insignificant value shown as in significant and VICE VERSA
FOR -ve Autocorrelation
If this happen than data is known as Spurious regression = not reliable
Multi collinearity
Check direct relation between dependent variables and independent variables
The test would make each variable dependent
Variance inflation test
Removes Independent variable, each dependent variable made independent and
runs the test
Check for significant value
Prob F-Stat
Value>4 then no need to run test
If not then run Ramsay Test if still not >4 then this means that a significant value
has been omitted