C7D2 - 1 GOLDFELD–QUANDT TEST FOR HETEROSCEDASTICITY The...

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Unformatted text preview: 1 GOLDFELD–QUANDT 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 β 1 X Y = β 1 + β 2 X Y X 3 X 5 X 4 X 1 X 2 β 1 X Y = β 1 + β 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. GOLDFELD–QUANDT TEST FOR HETEROSCEDASTICITY X 3 X 5 X 4 X 1 X 2 β 1 X Y = β 1 + β 2 X Y 3 This type of heteroscedasticity is illustrated in the diagram above. The standard deviation of the distribution is proportional to X . GOLDFELD–QUANDT TEST FOR HETEROSCEDASTICITY 4 The Goldfeld–Quandt 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 GOLDFELD–QUANDT 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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This note was uploaded on 05/26/2010 for the course ECON 301 taught by Professor Öcal during the Spring '10 term at Middle East Technical University.

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C7D2 - 1 GOLDFELD–QUANDT TEST FOR HETEROSCEDASTICITY The...

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