How do you run a White test in EViews?

How do you run a White test in EViews?

Once you have chosen a dependent variable, click on Next. Step two of the wizard lets you decide whether to include a White specification. If you check the Include White specification checkbox and click on Next, EViews will display the White Specification page which lets you specify options for the test.

What is the best test for heteroskedasticity?

There are three primary ways to test for heteroskedasticity. You can check it visually for cone-shaped data, use the simple Breusch-Pagan test for normally distributed data, or you can use the White test as a general model.

Why do we test for heteroskedasticity?

It is customary to check for heteroscedasticity of residuals once you build the linear regression model. The reason is, we want to check if the model thus built is unable to explain some pattern in the response variable Y , that eventually shows up in the residuals.

How do you run a White test for heteroskedasticity?

Follow these five steps to perform a White test:

1. Estimate your model using OLS:
2. Obtain the predicted Y values after estimating your model.
3. Estimate the model using OLS:
4. Retain the R-squared value from this regression:
5. Calculate the F-statistic or the chi-squared statistic:

What statistical test do you use for heteroskedasticity?

Breusch Pagan Test was introduced by Trevor Breusch and Adrian Pagan in 1979. It is used to test for heteroskedasticity in a linear regression model and assumes that the error terms are normally distributed.

What problems does heteroskedasticity cause?

Heteroskedasticity has serious consequences for the OLS estimator. Although the OLS estimator remains unbiased, the estimated SE is wrong. Because of this, confidence intervals and hypotheses tests cannot be relied on. In addition, the OLS estimator is no longer BLUE.

Why is the White test for heteroskedasticity general?

White’s test for Heteroskedasticity White test (Halbert White, 1980) proposed a test that is very similar to that by Breusch-Pagen. White test for Heteroskedasticity is general because it does not rely on the normality assumptions and it is also easy to implement.

Can a white test be computed without cross products?

Carries out White’s test for heteroskedasticity of the residuals of the specified equation. By default, the test is computed without the cross-product terms (using only the terms involving the original variables and squares of the original variables). You may elect to compute the original form of the White test that includes the cross-products.

How does the White test for homoscedasticity work?

Both White’s test and the Breusch-Pagan test are based on the residuals of the fitted model. To test the assumption of homoscedasticity, one can use auxiliary regression analysis by regressing the squared residuals from the original model on the set of original regressors, the cross-products of the regressors, and the squared regressors.

Why is the White test similar to Breusch-Pagen?

White test (Halbert White, 1980) proposed a test that is very similar to that by Breusch-Pagen. White test for Heteroskedasticity is general because it does not rely on the normality assumptions and it is also easy to implement. Because of the generality of White’s test, it may identify the specification bias too.