Economists James Durbin and Geoffrey Watson developed the Durbin Watson test in the early 1950s. They introduced the test in their paper "Testing for Serial Correlation in Least Squares Regression:…
Autocorrelation occurs when the error terms in the model exhibit correlation or dependency on each other. That is, errors in previous periods influence the errors in the current period. Economists…
Multicollinearity refers to a situation where the independent or explanatory variables in the model have a strong relationship with each other. Perfect multicollinearity exists if the correlation coefficient for these…
The Weighted Least Squares (WLS) method is a special form of Generalized Least Squares estimation. In this method, the original model is transformed so that the variance of residuals becomes…
The Goldfeld Quandt Test is used to detect the presence of heteroscedasticity in a regression model. This test was introduced by economists Arthur Goldfeld and Richard Quandt in the 1960s.…
The Breusch Pagan test for heteroscedasticity is sometimes also referred to as the BPG or Breusch Pagan Godfrey test. It is one of the most widely known tests for detecting…
The White test is one of the most commonly used statistical methods of detecting heteroscedasticity. It focuses on analysing the residuals from regression models to check for heteroscedasticity. Furthermore, the…
Heteroscedasticity is a situation where the variance of residuals is non-constant. Hence, it violates one of the assumptions of Ordinary Least Squares (OLS) which states that the residuals are homoscedastic…
The OLS or Ordinary Least Squares is one of the most widely used models in Econometrics and many other fields. Therefore, the interpretation of coefficients is one of the most…
OLS or Ordinary Least Squares is one of the most common methods used in Econometrics. It is a linear regression technique that minimizes the sum of squared residuals (error term)…
