UNIVERSITY OF ZIMBABWE

ECONOMETRICS HSTS423

ASSIGNMENT 2: LD/2020

Attempt ALL questions.

Q1. (a) Define the term ’heteroscedasticity’. [1]

(b) State and explain four main causes of heteroscedasticity. [4]
(c) The following data show expenditure data.

Household Consumption Income Income group

1 22 29 1
2 22 20 1
3 20 14 1
4 24 21 1
5 30 15 2
6 32 9 2
7 26 1 2
8 26 6 2
9 12 16 3
10 8 31 3
11 13 26 3
12 25 25 3

Test for heteroscedasticity in the linear regression model Y = β0 + β1 X + u for

consumption as a function of income using the following tests:
(i) Goldfeld-Quandt test with c = 2. [5]
(ii) Barttlets test. [5]

Q2. (a) State the four main courses of multicolinearity. [4]

(b) Briefly describe Frisch’s Confluence Analysis. [6]

page 1 of 1