Violation of OLS Assumptions

Breusch Pagan Test for Heteroscedasticity (2021)

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The Breusch Pagan test (named after Trevor Breusch and Adrian Pagan) is used to check for the presence of heteroscedasticity in a linear regression model. Assume our regression model is $Y_i = \beta_1 + \beta_2 X_{2i} + \mu_i$ i.e we have simple linear regression model, and $E(u_i^2)=\sigma_i^2$, where $\sigma_i^2=f(\alpha_1 + …

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Heteroscedasticity Definition, Reasons, Consequences (2012)

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Heteroscedasticity Definition An important assumption of OLS is that the disturbances $u_i$ appearing in the population regression function are homoscedastic (Error terms have the same variance).i.e. The variance of each disturbance term $u_i$, conditional on the chosen values of explanatory variables is some constant number equal to $\sigma^2$. $E(u_{i}^{2})=\sigma^2$; where …

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