The Inconsistency of the Breusch-Pagan Test
AbstractThe Breusch-Pagan Lagrange Multiplier test for heteroskedascity is supposedly able to detect heteroskedasticity which is an arbitrary function of some set of regressors. We will show that in fact it detects only linear functions. The test is inconsistent for general alternatives, in the sense that its power does not go to 1 as the sample size increases (and in fact, can be arbitrarily low). Since in fact the Breusch-Pagan test is essentially an F test in a special model, we also give necessary and sufficient conditions for the consistency of the F test under misspecification.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0205001.
Length: 10 pages
Date of creation: 23 May 2002
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Note: Type of Document - pdf; prepared on ibm-pc; pages: 10 ; figures: none. preprint of article subsequently published in Journal of Economic and Social Research vol 2 number 1 p1-11
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Breusch-Pagan test; heteroskedasticity; Lagrange Multiplier Test; Test consistency; F-test; necessary and sufficient conditions for consistency of F test;
Find related papers by JEL classification:
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
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- Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
- Jayasri Dutta & Asad Zaman, 1989. "What Do tests for Heteroskedasticity Detect?," Discussion Paper Serie A 248, University of Bonn, Germany.
- Koenker, Roger, 1981. "A note on studentizing a test for heteroscedasticity," Journal of Econometrics, Elsevier, vol. 17(1), pages 107-112, September.
- Chesher, Andrew D, 1984. "Testing for Neglected Heterogeneity," Econometrica, Econometric Society, vol. 52(4), pages 865-72, July.
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