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How do you detect Conditional Heteroskedasticity?

May 28, 2016

Method 1: Use a diagram

Method 2: Use the Breusch-Pagan test

Null Hypothesis = No Conditional Heteroskedasticity

Alternate Hypothesis = Conditional Heteroskedasticity

Test Statistic = n * R^2

Use critical value from chi-square distribution with degrees of freedom = k (# of Independent Variables)

If test statistic > critical value then there is Conditional Heteroskedasticity


From → Quant

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