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  • Heteroskedasticity

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    Muhammad Irfan Faisal
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    The document examines heteroskedasticity in earnings data from the financial sector in Budapest in 1999. It first shows a scatter plot of wages against age that indicates increasing variance with age. It then performs an OLS regression of the log of wages on variables like gender, education and age. Residual plots and statistical tests show the presence of heteroskedasticity. The regression is then re-estimated with robust standard errors to produce correct inferences in the presence of heteroskedasticity.

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    The document examines heteroskedasticity in earnings data from the financial sector in Budapest in 1999. It first shows a scatter plot of wages against age that indicates increasing variance with age. It then performs an OLS regression of the log of wages on variables like gender, education and age. Residual plots and statistical tests show the presence of heteroskedasticity. The regression is then re-estimated with robust standard errors to produce correct inferences in the presence of heteroskedasticity.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    19 views4 pages

    Heteroskedasticity

    Uploaded by

    Muhammad Irfan Faisal
    The document examines heteroskedasticity in earnings data from the financial sector in Budapest in 1999. It first shows a scatter plot of wages against age that indicates increasing variance with age. It then performs an OLS regression of the log of wages on variables like gender, education and age. Residual plots and statistical tests show the presence of heteroskedasticity. The regression is then re-estimated with robust standard errors to produce correct inferences in the presence of heteroskedasticity.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Heteroskedasticity

    Earnings. Financial sector, Budapest, 1999

    WAGE

    1000000

    100000

    10000
    10

    20

    30

    40

    50

    60

    AGE
    Heteroskedasticity

    Earnings function
    Dependent Variable: LOG(WAGE)
    Variable

    Coefficient

    Std. Error

    t-Statistic

    Prob.

    C
    FEMALE
    UNIV_GRAD
    UNIV_COLL
    HIGHS
    AGE
    AGE^2

    9.916510
    -0.165705
    0.791244
    0.520066
    0.063272
    0.071733
    -0.000760

    0.178412
    0.026338
    0.032284
    0.034617
    0.030066
    0.009996
    0.000132

    55.58221
    -6.291437
    24.50917
    15.02353
    2.104411
    7.175827
    -5.772736

    0.0000
    0.0000
    0.0000
    0.0000
    0.0355
    0.0000
    0.0000

    R-squared
    Adjusted R-squared
    S.E. of regression
    Sum squared resid
    Log likelihood
    Durbin-Watson stat

    0.379523
    0.377655
    0.512951
    524.3948
    -1499.219
    1.997579

    Mean dependent var


    S.D. dependent var
    Akaike info criterion
    Schwarz criterion
    F-statistic
    Prob(F-statistic)

    Heteroskedasticity

    11.60281
    0.650220
    1.506219
    1.525823
    203.1744
    0.000000

    Earnings function, residual plot, White test


    3
    2

    RESID

    1
    0
    -1
    -2
    -3
    10

    20

    30

    40

    50

    60

    AGE

    White Heteroskedasticity Test:


    F-statistic
    Obs*R-squared

    4.754979
    87.27494

    Probability
    Probability

    Heteroskedasticity

    0.000000
    0.000000
    3

    Earnings function, robust standard errors


    Dependent Variable: LOG(WAGE)
    White Heteroskedasticity-Consistent Standard Errors & Covariance
    Variable

    Coefficient

    Std. Error

    t-Statistic

    Prob.

    C
    FEMALE
    UNIV_GRAD
    UNIV_COLL
    HIGHS
    AGE
    AGE^2

    9.916510
    -0.165705
    0.791244
    0.520066
    0.063272
    0.071733
    -0.000760

    0.169707
    0.029013
    0.034689
    0.034268
    0.027603
    0.009769
    0.000132

    58.43311
    -5.711392
    22.80959
    15.17646
    2.292246
    7.342694
    -5.772394

    0.0000
    0.0000
    0.0000
    0.0000
    0.0220
    0.0000
    0.0000

    R-squared
    Adjusted R-squared
    S.E. of regression
    Sum squared resid
    Log likelihood
    Durbin-Watson stat

    0.379523
    0.377655
    0.512951
    524.3948
    -1499.219
    1.997579

    Mean dependent var


    S.D. dependent var
    Akaike info criterion
    Schwarz criterion
    F-statistic
    Prob(F-statistic)

    Heteroskedasticity

    11.60281
    0.650220
    1.506219
    1.525823
    203.1744
    0.000000

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