The Breusch-Godfrey’s LM test is one of the most popular tests for autocorrelation. However, it has been shown that the LM test may be erroneous when there exist heteroskedastic errors in regression model. Some remedies recently have been proposed by Godfrey and Tremayne (2005) and Shim et al. (2006). This paper suggests wild-bootstrapped variance ratio test for autocorrelation in the presence of heteroskedasticity. We show through a Monte Carlo simulation that our wild-bootstrapped VR test has better small sample properties and is robust to the structure of heteroskedasticity.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
9791.
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