《Financial Statistics and Econometrics课件》Lecture-07-08.pptVIP

Lectures 7 8Classical linear regression model assumptions and diagnostics Violation of the Assumptions of the CLRM Recall that we assumed of the CLRM disturbance terms: 1. E(ut) = 0 2. Var(ut) = ?2 ? 3. Cov (ui,uj) = 0 4. Cov (ut,xt)=0 5. ut ? N(0,?2) Investigating Violations of the Assumptions of the CLRM We will now study these assumptions further, and in particular look at: - How we test for violations - Causes - Consequences in general we could encounter any combination of 3 problems: - the coefficient estimates are wrong - the associated standard errors are wrong - the distribution that we assumed for the test statistics will be inappropriate - Solutions - the assumptions are no longer violated - we work around the problem so that we use alternative techniques which are still valid Statistical Distributions for Diagnostic Tests Often, an F- and a ?2- version of the test are available. The F-test version involves estimating a restricted and an unrestricted version of a test regression and comparing the RSS. The ?2- version is sometimes called an “LM” test, and only has one degree of freedom parameter: the number of restrictions being tested, m. Asymptotically, the 2 tests are equivalent since the ?2 is a special case of the F-distribution: For small samples, the F-version is preferable. Assumption 2: Var(ut) = ?2 ? We have so far assumed that the variance of the errors is constant, ?2 - this is known as homoscedasticity. If the errors do not have a constant variance, we say that they are heteroscedastic. Graphical methods to detect heteroscedasticity: Detection of Heteroscedasticity: The GQ Test Formal tests: There are many of them: we will discuss Goldfeld-Quandt test and White’s test The Goldfeld-Quandt (GQ) test is carried out as follows. Split the total sample of length T into two sub-samples of length T1 and T2. The regression model is estimated on each sub-sample and the two residual varianc