8.5

8.

5 Application of the white standard error and analyze the possible influence of the heteroskedasticity

975. t(0.a.025.497)*se+ ) .497)*se+ . Compare the 95% confidence interval of CRIME ROOMS AGE TAX using the white¶s standard error and the unmodified one ‡ The formula to compute the confidence interval is (t(0.

0052) White¶s (-0.2516.0067) .0038 0.narrower 0.0681.1119) (5. 0.6756) (-0. 7.0262) (-0.narrower 0.0365 ROOM 0.3924 S AGE 0.0201. wider 7.1406) (-0.0185.035 0.003 Confidence interval normal (-0.6024. 0. . . 0.Se normal White¶s CRIME 0.1148) (5.0202) (-0.665 0. .011 0.0754.0141 TAX 0.2549.0694.narrower 0.

1394 WHITE¶S SE 4.0723 0.b.075 0. Whether heteroskedasticity is a problem NOMAL SE NITOX DIST ACCESS PTRATIO 4.190 0.2001 0.1607 0.360 0.124 .

‡ The difference in the standard errors is not much for most coefficient estimates. the relative large ones for NITOX ROOMS will give misleading information of the reliability of the coefficient estimates ‡ P values for the parameters are all significant at the 5% significance using either standard errors ‡ So the heteroskedasticity is not likely to be a problem in this case .

TAX their significance interval are narrowed. AGE . Possible misleading inference if using the incorrect standard error ‡ The incorrect standard error will give the wrong T value and significance interval leading to overstate or understate the validity of the coefficient estimates ‡ CRIME . so the reliability of the coefficient estimates increased ‡ ROOMS now has a wider interval estimates indicating a less reliable estimation .c.

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