The Inconsistency of the Breusch-Pagan Test

Asad Zaman ()

Econometrics from EconWPA

Abstract: The 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.

Keywords: Breusch-Pagan test; heteroskedasticity; Lagrange Multiplier Test; Test consistency; F-test; necessary and sufficient conditions for consistency of F test (search for similar items in EconPapers)
JEL-codes: C2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2002-05-23
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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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0205001

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