What is breusch Pagan Godfrey test?
The Breusch-Pagan-Godfrey test (see Breusch-Pagan, 1979, and Godfrey, 1978) is a Lagrange multiplier test of the null hypothesis of no heteroskedasticity against heteroskedasticity of the form , where is a vector of independent variables.
How do you test for heteroskedasticity breusch Pagan?
One way to visually detect whether heteroscedasticity is present is to create a plot of the residuals against the fitted values of the regression model. If the residuals become more spread out at higher values in the plot, this is a tell-tale sign that heteroscedasticity is present.
What is the null hypothesis for breusch Pagan test?
The null hypothesis for this test is that the error variances are all equal. The alternate hypothesis is that the error variances are not equal. More specifically, as Y increases, the variances increase (or decrease).
How do you interpret a breusch Pagan p value?
This is the basis of the Breusch–Pagan test. It is a chi-squared test: the test statistic is distributed nχ2 with k degrees of freedom. If the test statistic has a p-value below an appropriate threshold (e.g. p < 0.05) then the null hypothesis of homoskedasticity is rejected and heteroskedasticity assumed.
How do you do a breusch Pagan test?
Here’s how to perform a BP test:
- Estimate your model using OLS:
- Obtain the predicted Y values after estimating the model.
- Estimate the auxiliary regression using OLS:
- From this auxiliary regression, retain the R-squared value:
- Calculate the F-statistic or the chi-squared statistic:
How do you interpret a Breusch Pagan p value?
The Breush-Pagan test creates a statistic that is chi-squared distributed and for your data that statistic=7.18. The p-value is the result of the chi-squared test and (normally) the null hypothesis is rejected for p-value < 0.05. In this case, the null hypothesis is of homoskedasticity and it would be rejected.
How do you run a breusch Pagan test?
What does a breusch Pagan test show?
Breusch Pagan Test It is used to test for heteroskedasticity in a linear regression model and assumes that the error terms are normally distributed. It tests whether the variance of the errors from a regression is dependent on the values of the independent variables. It is a χ2 test.
What is a good Breusch Pagan value?
The Breush-Pagan test creates a statistic that is chi-squared distributed and for your data that statistic=7.18. The p-value is the result of the chi-squared test and (normally) the null hypothesis is rejected for p-value < 0.05.
How do you interpret a Breusch Pagan p-value?
What does the breusch Pagan test show?