DiagonisingModelProblems - Heteroscedasticib DIAGNOSING...

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DIAGNOSING MODEL PROBLEMS Heteroscedasticib - a problem in which the variance of the residuals along a trend line is not constant. NOTE: the coefficient (~) .remains an unbiased Multicollineariw - a problem in which estimatornonetheless. two independent variables in a model are highly PROBLEMS caused by Heteroscedasticity: related. Multicollinearity is a sample 1} The coefficient (lJ) is not "efficient" or the phenomenon, not an estimation problem. "best" estimator. NOTE: If all of the independentvariablesarechecked, 2} The F-test is no longer reliable. andthe t-tests are significant,then multicollinearity 3}The t-tests are no longer reliable. shouldnotbea problem. CHECKINGfor Heteroscedasticity: PROBLEMS caused by Multicollinearity: 1} Check the scatterplot of residuals for fan 1} The estimated' coefficient (lJ) may no longer shaped patterns. be an unbiased estimators. 2} Goldfeld-Quandt test 2) Because of the strong interrelationships 3} Breusch-Pagan test between the independent variables, it is difficult 4}White test
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