C7D2 - 1 GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY The...

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Unformatted text preview: 1 GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY The disturbance term in a regression model is said to be homoscedastic if it has the same potential distribution in all observations. If this condition is not satisfied, it is said to be heteroscedastic, and clearly the possible types of heteroscedasticity are endless. X 3 X 5 X 4 X 1 X 2 1 X Y = 1 + 2 X Y X 3 X 5 X 4 X 1 X 2 1 X Y = 1 + 2 X Y 2 However, in one particularly common type the standard deviation of the distribution is proportional to the size of one of the explanatory variables. GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY X 3 X 5 X 4 X 1 X 2 1 X Y = 1 + 2 X Y 3 This type of heteroscedasticity is illustrated in the diagram above. The standard deviation of the distribution is proportional to X . GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY 4 The GoldfeldQuandt test is a test for this type of heteroscedasticity. The sample is divided into three ranges containing the 3/8 of the observations with the smallest values of the X variable, the 3/8 of the observations with the largest values, and 1/4 in the middle. 50000 100000 150000 200000 250000 300000 200000 400000 600000 800000 1000000 1200000 1400000 GDP Manufacturing GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY 5 In the present case with 28 observations, the lower, middle, and upper ranges have 11, 6, and 11 observations, respectively 50000 100000 150000 200000...
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C7D2 - 1 GOLDFELDQUANDT TEST FOR HETEROSCEDASTICITY The...

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