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Numerical and Monte Carlo Methods to make Normal Residues in Regression

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  • Ciuiu, Daniel

    () (Technical University of Civil Engineering, Bucharest)

Abstract

The Jarque-Bera normality test verifies if the residues of the regression hyper-plane are normal random variables.In this paper we present some numerical and Monte Carlo methods to obtain normal residues if the Jarque-Bera test fails. We consider the case when we know the pdf, the cdf and the inverse of the cdf for the random variable Y (example: the exponential distribution), the case when we know only the first two elements (example: Erlang distribution) and the case when we know only the pdf (example: the gamma distribution). We consider also the case when we do not know even an analytical formula for the pdf. In this case we will estimate the pdf using some known kernels (see section 2).

Suggested Citation

  • Ciuiu, Daniel, 2009. "Numerical and Monte Carlo Methods to make Normal Residues in Regression," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 119-131, December.
  • Handle: RePEc:rjr:romjef:v::y:2009:i:4:p:119-131
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    More about this item

    Keywords

    Jarque-Bera test; linear regression; kernels; Monte Carlo; credits;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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