Dependent Variable: SANDP

Method: Least Squares

Date: 05/26/19 Time: 20:26
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 20:37
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

LGM -0.473405 1.437019 -0.329436 0.7429

C 8.878520 4.994290 1.777734 0.0804

R-squared 0.001747 Mean dependent var 7.236382

Adjusted R-squared -0.014353 S.D. dependent var 2.456860
S.E. of regression 2.474429 Akaike info criterion 4.680648
Sum squared resid 379.6137 Schwarz criterion 4.748113
Log likelihood -147.7807 Hannan-Quinn criter. 4.707226
F-statistic 0.108528 Durbin-Watson stat 1.346288
Prob(F-statistic) 0.742937
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 20:38
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

LMS -2.960620 3.007462 -0.984425 0.3287

C 16.67424 9.592098 1.738331 0.0871

R-squared 0.015390 Mean dependent var 7.236382

Adjusted R-squared -0.000491 S.D. dependent var 2.456860
S.E. of regression 2.457463 Akaike info criterion 4.666887
Sum squared resid 374.4257 Schwarz criterion 4.734352
Log likelihood -147.3404 Hannan-Quinn criter. 4.693465
F-statistic 0.969092 Durbin-Watson stat 1.411055
Prob(F-statistic) 0.328733
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 20:50
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

LFORD -0.359473 0.310487 -1.157770 0.2514

C 7.675998 0.487840 15.73467 0.0000

R-squared 0.021162 Mean dependent var 7.236382

Adjusted R-squared 0.005375 S.D. dependent var 2.456860
S.E. of regression 2.450249 Akaike info criterion 4.661008
Sum squared resid 372.2306 Schwarz criterion 4.728473
Log likelihood -147.1522 Hannan-Quinn criter. 4.687585
F-statistic 1.340431 Durbin-Watson stat 1.368664
Prob(F-statistic) 0.251399
Dependent Variable: SANDP
Method: Least Squares
Date: 05/26/19 Time: 20:54
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000
Dependent Variable: SANDP
Method: Least Squares
Date: 05/26/19 Time: 21:15
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 21:19
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABMS -3.125481 2.942521 -1.062178 0.2924

ABGM -1.988429 1.129889 -1.759844 0.0835
ABFORD -2.063197 1.243872 -1.658690 0.1024
C 216.3469 83.47033 2.591902 0.0120

R-squared 0.089938 Mean dependent var 63.23472

Adjusted R-squared 0.044435 S.D. dependent var 57.20389
S.E. of regression 55.91853 Akaike info criterion 10.94613
Sum squared resid 187612.9 Schwarz criterion 11.08106
Log likelihood -346.2762 Hannan-Quinn criter. 10.99929
F-statistic 1.976527 Durbin-Watson stat 1.024352
Prob(F-statistic) 0.127100
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 21:20
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABMS -3.686916 2.836372 -1.299871 0.1985

C 153.0561 69.46521 2.203348 0.0313

R-squared 0.026530 Mean dependent var 63.23472

Adjusted R-squared 0.010828 S.D. dependent var 57.20389
S.E. of regression 56.89334 Akaike info criterion 10.95098
Sum squared resid 200684.8 Schwarz criterion 11.01845
Log likelihood -348.4315 Hannan-Quinn criter. 10.97756
F-statistic 1.689663 Durbin-Watson stat 0.957322
Prob(F-statistic) 0.198457
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 21:21
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABGM -0.919192 1.039388 -0.884359 0.3799

C 93.41322 34.86839 2.679023 0.0094

R-squared 0.012457 Mean dependent var 63.23472

Adjusted R-squared -0.003471 S.D. dependent var 57.20389
S.E. of regression 57.30308 Akaike info criterion 10.96534
Sum squared resid 203585.9 Schwarz criterion 11.03280
Log likelihood -348.8908 Hannan-Quinn criter. 10.99192
F-statistic 0.782090 Durbin-Watson stat 0.897527
Prob(F-statistic) 0.379919
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 21:21
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABGM -0.919192 1.039388 -0.884359 0.3799

C 93.41322 34.86839 2.679023 0.0094

R-squared 0.012457 Mean dependent var 63.23472

Adjusted R-squared -0.003471 S.D. dependent var 57.20389
S.E. of regression 57.30308 Akaike info criterion 10.96534
Sum squared resid 203585.9 Schwarz criterion 11.03280
Log likelihood -348.8908 Hannan-Quinn criter. 10.99192
F-statistic 0.782090 Durbin-Watson stat 0.897527
Prob(F-statistic) 0.379919
Dependent Variable: MICROSOFT
Method: Least Squares
Date: 05/26/19 Time: 23:28
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CONSUMER_CREDIT -0.000129 9.99E-06 -12.93255 0.0000

CPI 2.258900 0.214453 10.53330 0.0000
C -110.9622 21.06808 -5.266839 0.0000

R-squared 0.468274 Mean dependent var 70.26205

Adjusted R-squared 0.464037 S.D. dependent var 33.17173
S.E. of regression 24.28486 Akaike info criterion 9.229324
Sum squared resid 148028.4 Schwarz criterion 9.271104
Log likelihood -1169.124 Hannan-Quinn criter. 9.246132
F-statistic 110.5236 Durbin-Watson stat 0.298275
Prob(F-statistic) 0.000000
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 23:32
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

LCPI -1.093649 0.701957 -1.558000 0.1205

C 10.66694 3.538655 3.014405 0.0028

R-squared 0.009540 Mean dependent var 5.157103

Adjusted R-squared 0.005610 S.D. dependent var 1.981637
S.E. of regression 1.976071 Akaike info criterion 4.207941
Sum squared resid 984.0239 Schwarz criterion 4.235794
Log likelihood -532.4085 Hannan-Quinn criter. 4.219146
F-statistic 2.427363 Durbin-Watson stat 0.880221
Prob(F-statistic) 0.120488
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 23:36
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CONSUMER_CREDIT -5.10E-07 2.13E-07 -2.388371 0.0177

C 5.837599 0.310415 18.80577 0.0000

R-squared 0.022135 Mean dependent var 5.157103

Adjusted R-squared 0.018255 S.D. dependent var 1.981637
S.E. of regression 1.963467 Akaike info criterion 4.195144
Sum squared resid 971.5111 Schwarz criterion 4.222997
Log likelihood -530.7832 Hannan-Quinn criter. 4.206348
F-statistic 5.704314 Durbin-Watson stat 0.891438
Prob(F-statistic) 0.017660
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 23:38
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CONSUMER_CREDIT -1.22E-06 6.77E-07 -1.797449 0.0735

LIP 2.197723 1.997543 1.100213 0.2723
C -2.959296 8.001647 -0.369836 0.7118

R-squared 0.026828 Mean dependent var 5.157103

Adjusted R-squared 0.019074 S.D. dependent var 1.981637
S.E. of regression 1.962648 Akaike info criterion 4.198207
Sum squared resid 966.8484 Schwarz criterion 4.239986
Log likelihood -530.1722 Hannan-Quinn criter. 4.215014
F-statistic 3.459773 Durbin-Watson stat 0.895142
Prob(F-statistic) 0.032944
Dependent Variable: MICROSOFT
Method: Least Squares
Date: 05/26/19 Time: 23:42
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI 1.418386 0.223540 6.345123 0.0000

CONSUMER_CREDIT -0.000163 1.01E-05 -16.16966 0.0000
INDUSTRIAL_PRODUCTION 2.597497 0.343823 7.554752 0.0000
C -157.3041 20.01096 -7.860898 0.0000

R-squared 0.567103 Mean dependent var 70.26205

Adjusted R-squared 0.561908 S.D. dependent var 33.17173
S.E. of regression 21.95588 Akaike info criterion 9.031570
Sum squared resid 120515.2 Schwarz criterion 9.087276
Log likelihood -1143.009 Hannan-Quinn criter. 9.053980
F-statistic 109.1681 Durbin-Watson stat 0.417986
Prob(F-statistic) 0.000000
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 23:45
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

LCPI -3.654869 0.806076 -4.534152 0.0000

C 23.09286 4.063529 5.682957 0.0000

R-squared 0.075428 Mean dependent var 4.679517

Adjusted R-squared 0.071759 S.D. dependent var 2.355251
S.E. of regression 2.269173 Akaike info criterion 4.484551
Sum squared resid 1297.585 Schwarz criterion 4.512404
Log likelihood -567.5380 Hannan-Quinn criter. 4.495756
F-statistic 20.55853 Durbin-Watson stat 1.086181
Prob(F-statistic) 0.000009

Dependent Variable: LRESID2

Method: Least Squares
Date: 05/26/19 Time: 23:58
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

LIP -3.084600 0.731945 -4.214251 0.0000

C 18.35005 3.247039 5.651320 0.0000

R-squared 0.065836 Mean dependent var 4.679517

Adjusted R-squared 0.062129 S.D. dependent var 2.355251
S.E. of regression 2.280913 Akaike info criterion 4.494872
Sum squared resid 1311.047 Schwarz criterion 4.522725
Log likelihood -568.8487 Hannan-Quinn criter. 4.506077
F-statistic 17.75991 Durbin-Watson stat 1.082108
Prob(F-statistic) 0.000035
Dependent Variable: LRESID2
Method: Least Squares
Date: 05/26/19 Time: 23:59
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CONSUMER_CREDIT -1.39E-06 2.41E-07 -5.757878 0.0000

C 6.533138 0.350734 18.62704 0.0000

R-squared 0.116264 Mean dependent var 4.679517

Adjusted R-squared 0.112758 S.D. dependent var 2.355251
S.E. of regression 2.218495 Akaike info criterion 4.439378
Sum squared resid 1240.273 Schwarz criterion 4.467231
Log likelihood -561.8010 Hannan-Quinn criter. 4.450583
F-statistic 33.15316 Durbin-Watson stat 1.135313
Prob(F-statistic) 0.000000
Gelsiure test

Dependent Variable: MICROSOFT

Method: Least Squares
Date: 05/26/19 Time: 23:52
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

INDUSTRIAL_PRODUCTION 2.597497 0.343823 7.554752 0.0000

CPI 1.418386 0.223540 6.345123 0.0000
CONSUMER_CREDIT -0.000163 1.01E-05 -16.16966 0.0000
C -157.3041 20.01096 -7.860898 0.0000

R-squared 0.567103 Mean dependent var 70.26205

Adjusted R-squared 0.561908 S.D. dependent var 33.17173
S.E. of regression 21.95588 Akaike info criterion 9.031570
Sum squared resid 120515.2 Schwarz criterion 9.087276
Log likelihood -1143.009 Hannan-Quinn criter. 9.053980
F-statistic 109.1681 Durbin-Watson stat 0.417986
Prob(F-statistic) 0.000000
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 23:53
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

ABCPI -0.147237 0.031547 -4.667234 0.0000

C 39.71156 5.010607 7.925499 0.0000

R-squared 0.079563 Mean dependent var 16.66311

Adjusted R-squared 0.075911 S.D. dependent var 14.05659
S.E. of regression 13.51254 Akaike info criterion 8.052956
Sum squared resid 46012.36 Schwarz criterion 8.080809
Log likelihood -1020.725 Hannan-Quinn criter. 8.064161
F-statistic 21.78308 Durbin-Watson stat 0.709976
Prob(F-statistic) 0.000005

Dependent Variable: ABRESID

Method: Least Squares
Date: 05/26/19 Time: 23:55
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

ABCC -8.20E-06 1.44E-06 -5.691034 0.0000

C 27.61215 2.096063 13.17334 0.0000

R-squared 0.113886 Mean dependent var 16.66311

Adjusted R-squared 0.110370 S.D. dependent var 14.05659
S.E. of regression 13.25821 Akaike info criterion 8.014953
Sum squared resid 44296.56 Schwarz criterion 8.042806
Log likelihood -1015.899 Hannan-Quinn criter. 8.026158
F-statistic 32.38786 Durbin-Watson stat 0.737052
Prob(F-statistic) 0.000000
Dependent Variable: ABRESID
Method: Least Squares
Date: 05/26/19 Time: 23:57
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

ABIP -0.225412 0.051696 -4.360353 0.0000

C 35.97953 4.511233 7.975543 0.0000

R-squared 0.070154 Mean dependent var 16.66311

Adjusted R-squared 0.066464 S.D. dependent var 14.05659
S.E. of regression 13.58143 Akaike info criterion 8.063127
Sum squared resid 46482.71 Schwarz criterion 8.090980
Log likelihood -1022.017 Hannan-Quinn criter. 8.074332
F-statistic 19.01268 Durbin-Watson stat 0.704128
Prob(F-statistic) 0.000019
PARK LM TEST

Hypothesis Testing

HO: Homskedacity

H1: Hetrosckedacity

α=0.05 or 0.01

Region of Rejection

F greater than Fα, K-1,N-K

1) General Regression

Dependent Variable: SANDP

Method: Least Squares
Date: 05/27/19 Time: 11:27
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000
2. Auxiliary Regression

Run Auxiliary Regression : log of Sum of Residual Square (Lresid2) on log of explanatory variables (LFord,
LGM,LMS)

Dependent Variable: LRESID2

Method: Least Squares
Date: 05/27/19 Time: 11:43
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

LFORD -0.555282 0.427366 -1.299313 0.1988

LGM -2.055611 1.755016 -1.171278 0.2461
LMS -1.255777 3.444831 -0.364540 0.7167
C 19.04909 11.92099 1.597945 0.1153

R-squared 0.046805 Mean dependent var 7.236382

Adjusted R-squared -0.000855 S.D. dependent var 2.456860
S.E. of regression 2.457910 Akaike info criterion 4.696961
Sum squared resid 362.4793 Schwarz criterion 4.831891
Log likelihood -146.3028 Hannan-Quinn criter. 4.750117
F-statistic 0.982065 Durbin-Watson stat 1.426300
Prob(F-statistic) 0.407325

Result

The t-statistic is in significant as they are less than value of 2, we may accept the Null Hypothesisi.o
Homoskedacity
PARK LM TEST

Hypothesis Testing

HO: Homskedacity

H1: Hetrosckedacity

α=0.05 or 0.01

Region of Rejection

F greater than Fα, K-1,N-K

Auxiliary Regression

Run Auxiliary Regression : log of Sum of Residual Square (Lresid2) on log of explanatory variable (LGM)

Dependent Variable: LRESID2

Method: Least Squares
Date: 05/26/19 Time: 20:37
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

LGM -0.473405 1.437019 -0.329436 0.7429

C 8.878520 4.994290 1.777734 0.0804

R-squared 0.001747 Mean dependent var 7.236382

Adjusted R-squared -0.014353 S.D. dependent var 2.456860
S.E. of regression 2.474429 Akaike info criterion 4.680648
Sum squared resid 379.6137 Schwarz criterion 4.748113
Log likelihood -147.7807 Hannan-Quinn criter. 4.707226
F-statistic 0.108528 Durbin-Watson stat 1.346288
Prob(F-statistic) 0.742937

Result

The t-statistic is in significant as they are less than value of 2, we may accept the Null Hypothesis of
Homoskedacity
PARK LM TEST - Second Dataset (MACRO)

Hypothesis Testing

HO: Homskedacity

H1: Hetrosckedacity

α=0.05 or 0.01

Region of Rejection

F greater than Fα, K-1,N-K

1) General Regression

Dependent Variable = Microsoft

Independent Variabes=(CPI,Consumer Credit, Industrial Prodution)

Dependent Variable: MICROSOFT

Method: Least Squares
Date: 05/27/19 Time: 12:02
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI 1.418386 0.223540 6.345123 0.0000

CONSUMER_CREDIT -0.000163 1.01E-05 -16.16966 0.0000
INDUSTRIAL_PRODUCTION 2.597497 0.343823 7.554752 0.0000
C -157.3041 20.01096 -7.860898 0.0000

R-squared 0.567103 Mean dependent var 70.26205

Adjusted R-squared 0.561908 S.D. dependent var 33.17173
S.E. of regression 21.95588 Akaike info criterion 9.031570
Sum squared resid 120515.2 Schwarz criterion 9.087276
Log likelihood -1143.009 Hannan-Quinn criter. 9.053980
F-statistic 109.1681 Durbin-Watson stat 0.417986
Prob(F-statistic) 0.000000

Interpretation

The explanatory variables are statistically significant as the T-Stats is greater than value of 2. The
explanatory power of the mode is 57%. The goodness of model is fit as F-Statistics value is greater than
3.5 and Prob( F-statistic) is zero.
2. Auxiliary Regression

Run Auxiliary Regression:Run Regression of log of Sum of Residual Square (Lresid2) on log of
explanatory variables (LCPI, LConsumer Credit and LIndustrial Production)

Dependent Variable: LRESID2

Method: Least Squares
Date: 05/27/19 Time: 12:16
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

LCPI 2.966219 3.254421 0.911443 0.3629

LCC -8.417795 1.815479 -4.636679 0.0000
LIP 12.76159 3.556186 3.588562 0.0004
C 51.10769 7.389414 6.916339 0.0000

R-squared 0.149251 Mean dependent var 4.679517

Adjusted R-squared 0.139042 S.D. dependent var 2.355251
S.E. of regression 2.185386 Akaike info criterion 4.417085
Sum squared resid 1193.978 Schwarz criterion 4.472791
Log likelihood -556.9698 Hannan-Quinn criter. 4.439495
F-statistic 14.61960 Durbin-Watson stat 1.160763
Prob(F-statistic) 0.000000

Interpretation

The auxiliary regression result shows that all explanatory variables are statistically significant and have
hetroskadacity except CPI which statistical is insignificant.
Glesjre Test (Data set-1)

Hypothesis Testing
HO: Homskedacity

H1: Hetrosckedacity

α=0.05 or 0.01

LM =N.R2

LM=Lagrange Multiplier
N= No. of Observations
R2= Coefficient of determination
Values of R2 are found by different auxiliary regression according to the Test applied

Or
F=R2/1-R2 N-K/K-1

Region of Rejection
LM(Lagrange Multiplier)> Chi Square K (X2K)

Or

F >Fα, K-1,N-K
 1. General Regression

We run General Regression to get the residual.

Dependent Variable: SANDP

Method: Least Squares
Date: 05/26/19 Time: 21:15
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000

Auxiliary Regressions

In following Auxiliary Regressing we regressed the absolute value of Residual on absolute values of
explanatory variables in Glesjre Test. Here, we run three auxiliary regressions with same Absolute
value of error with different forms (Absolute ,Square root and Reciprocal) of explanatory variables to
check the Hetroskadecity.
Auxiliary Regression (1)-With Absolute Values of Dependent and Independent Variables)

(Abs)µ=α0+αMS+αGM+αFord

Dependent Variable: ABRSID

Method: Least Squares
Date: 05/27/19 Time: 12:49
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABMS -3.125481 2.942521 -1.062178 0.2924

ABGM -1.988429 1.129889 -1.759844 0.0835
ABFORD -2.063197 1.243872 -1.658690 0.1024
C 216.3469 83.47033 2.591902 0.0120

R-squared 0.089938 Mean dependent var 63.23472

Adjusted R-squared 0.044435 S.D. dependent var 57.20389
S.E. of regression 55.91853 Akaike info criterion 10.94613
Sum squared resid 187612.9 Schwarz criterion 11.08106
Log likelihood -346.2762 Hannan-Quinn criter. 10.99929
F-statistic 1.976527 Durbin-Watson stat 1.024352
Prob(F-statistic) 0.127100

Auxiliary Regression 2 (With Square Root of Explanatory Variables)

Abs µ=α0+UNDER ROOTGM+ UNDER ROOTFORD+ UNDER ROOTMS+µ

Dependent Variable: ABRSID

Method: Least Squares
Date: 05/27/19 Time: 12:57
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABSRGM -26.06386 13.54552 -1.924168 0.0591

ABSRFORD -14.17299 7.730118 -1.833477 0.0717
ABSRMS -22.65146 30.10739 -0.752356 0.4548
C 353.0716 165.8134 2.129332 0.0373

R-squared 0.096520 Mean dependent var 63.23472

Adjusted R-squared 0.051346 S.D. dependent var 57.20389
S.E. of regression 55.71595 Akaike info criterion 10.93887
Sum squared resid 186256.0 Schwarz criterion 11.07380
Log likelihood -346.0439 Hannan-Quinn criter. 10.99203
F-statistic 2.136625 Durbin-Watson stat 1.018251
Prob(F-statistic) 0.104992
Auxiliary Regression 3 [Reciprocal (1/x) of Explanatory Variables]

Dependent Variable: ABRSID

Method: Least Squares
Date: 05/27/19 Time: 13:12
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

ABRECIP_FORD_ 38.18762 24.26937 1.573490 0.1209

ABRECIP_GM_ 705.1501 420.6162 1.676469 0.0988
ABRECIP_MS_ 412.4554 776.8766 0.530915 0.5974
C -162.8364 168.6010 -0.965809 0.3380

R-squared 0.077362 Mean dependent var 63.23472

Adjusted R-squared 0.031230 S.D. dependent var 57.20389
S.E. of regression 56.30358 Akaike info criterion 10.95985
Sum squared resid 190205.6 Schwarz criterion 11.09478
Log likelihood -346.7153 Hannan-Quinn criter. 11.01301
F-statistic 1.676967 Durbin-Watson stat 0.988195
Prob(F-statistic) 0.181507

Here, we have following three different R2 usually we have one R2.

Auxiliary Regressions R2 L.M =N*R2 (64*R2)

R2 of Aux Regression 1 0.089938 5.7560
R2 of Aux Regression 2 0.096520 6.1772
R2 of Aux Regression 3 0.077362 4.9511

Chi Square Value Calculated through Excel

CHSQ(0.05,3)=CHISQ.INV.RT(0.05,3)=7.81

Result Interpretation

As LM is greater than CHI Square is not met in all three cases, we have strong evidence not to
reject Ho and conclude that errors are not hetroskedastic.

In other words, as LM < 𝐶𝐻𝐼 𝑆𝑄𝑈𝐴𝑅𝐸 Value, we cannot reject Ho and conclude that errors are
not hetroskedastic.
Glesjre Data set 2

General Regression

Dependent Variable: MICROSOFT

Method: Least Squares
Date: 05/27/19 Time: 14:46
Sample: 1986M03 2013M04
Included observations: 326

Variable Coefficient Std. Error t-Statistic Prob.

CPI 1.598405 0.156431 10.21798 0.0000

CONSUMER_CREDIT -0.000153 8.60E-06 -17.77560 0.0000
INDUSTRIAL_PRODUCTION 2.290697 0.205198 11.16335 0.0000
C -152.1592 17.73864 -8.577838 0.0000

R-squared 0.670853 Mean dependent var 60.73368

Adjusted R-squared 0.667787 S.D. dependent var 34.36851
S.E. of regression 19.80930 Akaike info criterion 8.822375
Sum squared resid 126355.5 Schwarz criterion 8.868840
Log likelihood -1434.047 Hannan-Quinn criter. 8.840917
F-statistic 218.7623 Durbin-Watson stat 0.363127
Prob(F-statistic) 0.000000
Auxiliary Regression 1 with Absolute Values

Dependent Variable: ABRESID

Method: Least Squares
Date: 05/27/19 Time: 14:50
Sample: 1986M03 2013M04
Included observations: 326

Variable Coefficient Std. Error t-Statistic Prob.

ABCPI 0.219942 0.093495 2.352436 0.0193

ABCC -2.13E-05 5.14E-06 -4.141400 0.0000
ABIP 0.182766 0.122643 1.490228 0.1371
C -3.379690 10.60203 -0.318778 0.7501

R-squared 0.173764 Mean dependent var 14.83302

Adjusted R-squared 0.166066 S.D. dependent var 12.96499
S.E. of regression 11.83962 Akaike info criterion 7.792975
Sum squared resid 45136.89 Schwarz criterion 7.839440
Log likelihood -1266.255 Hannan-Quinn criter. 7.811517
F-statistic 22.57304 Durbin-Watson stat 0.688625
Prob(F-statistic) 0.000000
Auxiliary Regression 2 with Square root of explanatory Variables

Dependent Variable: ABRESID

Method: Least Squares
Date: 05/27/19 Time: 14:56
Sample: 1986M03 2013M04
Included observations: 326

Variable Coefficient Std. Error t-Statistic Prob.

ABSQRTCPI 4.940656 2.389627 2.067543 0.0395

ABSSQRTCC -0.054438 0.013614 -3.998623 0.0001
ABSSQRTIP 5.430987 2.515683 2.158851 0.0316
C -30.91084 23.46407 -1.317369 0.1887

R-squared 0.166097 Mean dependent var 14.83302

Adjusted R-squared 0.158327 S.D. dependent var 12.96499
S.E. of regression 11.89443 Akaike info criterion 7.802212
Sum squared resid 45555.75 Schwarz criterion 7.848677
Log likelihood -1267.761 Hannan-Quinn criter. 7.820754
F-statistic 21.37862 Durbin-Watson stat 0.682687
Prob(F-statistic) 0.000000
Auxiliary Regression 3 with Reciprocal of explanatory Variables

Dependent Variable: ABRESID

Method: Least Squares
Date: 05/27/19 Time: 15:02
Sample: 1986M03 2013M04
Included observations: 326

Variable Coefficient Std. Error t-Statistic Prob.

ABRECIPCPI -257.3644 2492.214 -0.103267 0.9178

ABRECIPCC 26258440 15090998 1.740007 0.0828
ABRECIPIP -2277.188 1537.310 -1.481281 0.1395
C 24.91158 17.13484 1.453855 0.1470

R-squared 0.114272 Mean dependent var 14.83302

Adjusted R-squared 0.106020 S.D. dependent var 12.96499
S.E. of regression 12.25846 Akaike info criterion 7.862504
Sum squared resid 48386.92 Schwarz criterion 7.908969
Log likelihood -1277.588 Hannan-Quinn criter. 7.881047
F-statistic 13.84754 Durbin-Watson stat 0.643777
Prob(F-statistic) 0.000000

Auxiliary Regressions R2 L.M =N*R2 (326*R2)

1 0.173764 56.64
2 0.166097 54.14
3 0.114272 37.25
CHSQ(0.05,3)=CHISQ.INV.RT(0.05,3)=7.81

Result Interpretation

As LM is greater than CHI Square is met in all three cases, we have strong evidence to reject Ho
and conclude that errors are hetroskedastic.
BREUCH PAGAN TEST

Step 1

Run a regression, find error then find square of error. So we have run the following
regression SANDP on Microsoft, GM,Ford and get error and square of error.

Dependent Variable: SANDP

Method: Least Squares
Date: 05/27/19 Time: 20:24
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000

Step-2

Run an auxiliary regression square of error on explanatory variables and obtain R2

Dependent Variable: RESID2

Method: Least Squares
Date: 05/27/19 Time: 20:34
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT -625.2673 609.5987 -1.025703 0.3091

GM -501.8132 234.0778 -2.143788 0.0361
FORD -418.0197 257.6915 -1.622171 0.1100
C 41295.54 17292.45 2.388068 0.0201

R-squared 0.100380 Mean dependent var 7219.786

Adjusted R-squared 0.055399 S.D. dependent var 11919.44
S.E. of regression 11584.58 Akaike info criterion 21.61320
Sum squared resid 8.05E+09 Schwarz criterion 21.74813
Log likelihood -687.6223 Hannan-Quinn criter. 21.66635
F-statistic 2.231602 Durbin-Watson stat 0.827510
Prob(F-statistic) 0.093731
We obtained R2 from auxiliary regression i.e. 0.100 using OLS

Results
a) LM TEST

LM = N.R2

LM=64*0.100 =6.4

CHSQ(0.05,3)=CHISQ.INV.RT(0.05,3)=7.81

As LM < 𝑪𝑯𝑰 𝑺𝑸𝑼𝑨𝑹𝑬 Value, we cannot reject Ho and conclude that errors are not
hetroskedastic

b) F-stats

F-Value is also less than 3.5 i.e 2.23, so we accept Ho and conclude that errors are not
Hetroskedastic
BREUCH PAGAN TEST- Data Set-2

Step 1

Run a regression, find error then find square of error. So we have run the following regression
Microsoft on CPI, Industrial Production, Consumer and Credit Microsoft and get error and
square of error.

Dependent Variable: MICROSOFT

Method: Least Squares
Date: 05/27/19 Time: 21:11
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI 1.418386 0.223540 6.345123 0.0000

CONSUMER_CREDIT -0.000163 1.01E-05 -16.16966 0.0000
INDUSTRIAL_PRODUCTION 2.597497 0.343823 7.554752 0.0000
C -157.3041 20.01096 -7.860898 0.0000

R-squared 0.567103 Mean dependent var 70.26205

Adjusted R-squared 0.561908 S.D. dependent var 33.17173
S.E. of regression 21.95588 Akaike info criterion 9.031570
Sum squared resid 120515.2 Schwarz criterion 9.087276
Log likelihood -1143.009 Hannan-Quinn criter. 9.053980
F-statistic 109.1681 Durbin-Watson stat 0.417986
Prob(F-statistic) 0.000000

Step-2

Run an auxiliary regression square of error on explanatory variables and obtain R2

Dependent Variable: RESID2

Method: Least Squares
Date: 05/27/19 Time: 21:14
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI 7.778402 7.735149 1.005592 0.3156

CONSUMER_CREDIT -0.001413 0.000348 -4.060960 0.0001
INDUSTRIAL_PRODUCTION 27.67126 11.89731 2.325841 0.0208
C -1228.092 692.4398 -1.773572 0.0774

R-squared 0.091853 Mean dependent var 474.4691

Adjusted R-squared 0.080955 S.D. dependent var 792.4950
S.E. of regression 759.7400 Akaike info criterion 16.11945
Sum squared resid 1.44E+08 Schwarz criterion 16.17516
Log likelihood -2043.170 Hannan-Quinn criter. 16.14186
F-statistic 8.428562 Durbin-Watson stat 0.955267
Prob(F-statistic) 0.000023
We obtained R2 from above auxiliary regression i.e. 0.091 using OLS.

Results
a) LM TEST

LM = N.R2

LM=254*0.091 =23.11

CHSQ(0.05,3)=CHISQ.INV.RT(0.05,3)=7.81

Result Interpretation
As LM is greater than CHI Square , we have strong evidence to reject Ho and conclude
that errors are hetroskedastic.

b) F-stats

F-Value is also greater than 3.5 i.e. 8.42, so we reject Ho and conclude that errors are
Hetroskedastic
White Test-(Dataset-1)

Step 1

Run a regression, find error then find square of error. So we have run the following
regression SANDP on Microsoft, GM,Ford and get error and square of error.

Dependent Variable: SANDP

Method: Least Squares
Date: 05/27/19 Time: 20:24
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 52.26049 4.617857 11.31705 0.0000

GM -0.096568 1.773196 -0.054460 0.9567
FORD 3.176486 1.952075 1.627236 0.1089
C -145.0777 130.9945 -1.107511 0.2725

R-squared 0.727895 Mean dependent var 1142.922

Adjusted R-squared 0.714289 S.D. dependent var 164.1774
S.E. of regression 87.75594 Akaike info criterion 11.84746
Sum squared resid 462066.3 Schwarz criterion 11.98239
Log likelihood -375.1186 Hannan-Quinn criter. 11.90061
F-statistic 53.50093 Durbin-Watson stat 0.590252
Prob(F-statistic) 0.000000
Step-2

Run Auxiliary Regression which is different from previous test. Run Square of error on
MS,Ford,GM,MS2,Ford2,GM2,(MS*Ford),(MS*GM),(GM*MS2)

Dependent Variable: RESID2

Method: Least Squares
Date: 05/27/19 Time: 22:18
Sample: 2002M01 2007M04
Included observations: 64

Variable Coefficient Std. Error t-Statistic Prob.

MICROSOFT 15546.54 11742.49 1.323956 0.1911

FORD -601.9940 6674.342 -0.090195 0.9285
GM -5987.824 4781.576 -1.252270 0.2159
MS2 -370.9889 209.5436 -1.770462 0.0823
FORD2 73.29870 55.78896 1.313857 0.1944
GM2 34.49057 32.82670 1.050686 0.2981
MSFORD -147.0076 261.3976 -0.562391 0.5762
MSGM 104.1560 153.0109 0.680709 0.4990
FORDGM 60.00256 75.60073 0.793677 0.4309
C -65147.20 190669.9 -0.341675 0.7339

R-squared 0.235867 Mean dependent var 7219.786

Adjusted R-squared 0.108511 S.D. dependent var 11919.44
S.E. of regression 11254.18 Akaike info criterion 21.63747
Sum squared resid 6.84E+09 Schwarz criterion 21.97479
Log likelihood -682.3990 Hannan-Quinn criter. 21.77036
F-statistic 1.852035 Durbin-Watson stat 0.984434
Prob(F-statistic) 0.079729

We obtained R2 i.e. 0.23 from above regression

Results
a) LM TEST

LM = N.R2

LM=64*0.23 =15

CHSQ(0.05,9)=CHISQ.INV.RT(0.05,9)=16.9

As LM < 𝑪𝑯𝑰 𝑺𝑸𝑼𝑨𝑹𝑬 Value, we cannot reject Ho and conclude that errors are not
hetroskedastic

b) F-stats

F-Value is also less than 3.5 i.e 1.85, so we accept Ho and conclude that errors are not
Hetroskedastic
White Test-(Data set-2)

Step-1

Run a regression, find error then find square of error. So we have run the following regression
Microsoft on CPI, Industrial Production, Consumer and Credit Microsoft and get error and
square of error.

Dependent Variable: MICROSOFT

Method: Least Squares
Date: 05/27/19 Time: 21:11
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI 1.418386 0.223540 6.345123 0.0000

CONSUMER_CREDIT -0.000163 1.01E-05 -16.16966 0.0000
INDUSTRIAL_PRODUCTION 2.597497 0.343823 7.554752 0.0000
C -157.3041 20.01096 -7.860898 0.0000

R-squared 0.567103 Mean dependent var 70.26205

Adjusted R-squared 0.561908 S.D. dependent var 33.17173
S.E. of regression 21.95588 Akaike info criterion 9.031570
Sum squared resid 120515.2 Schwarz criterion 9.087276
Log likelihood -1143.009 Hannan-Quinn criter. 9.053980
F-statistic 109.1681 Durbin-Watson stat 0.417986
Prob(F-statistic) 0.000000
Step-2

Run Auxiliary Regression which is different from previous test. Run Square of error on
CPI,CC,IP,CPI2,CC2,IP2,(CPI*CC,)(CPI*IP),(CC*IP) and obtain R2

Dependent Variable: RESID2

Method: Least Squares
Date: 05/27/19 Time: 21:53
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CPI -312.2805 240.2144 -1.300008 0.1948

CONSUMER_CREDIT 0.015220 0.014644 1.039292 0.2997
INDUSTRIAL_PRODUCTION -192.5629 399.7398 -0.481721 0.6304
CPI2 -0.409172 1.912203 -0.213980 0.8307
CC2 1.39E-09 4.22E-09 0.329300 0.7422
IP2 -4.638156 3.220045 -1.440401 0.1510
CPICC -8.83E-05 0.000127 -0.694670 0.4879
CPIIP 7.037187 5.152620 1.365749 0.1733
CCIP -8.36E-05 0.000187 -0.447718 0.6548
C 20947.64 13809.17 1.516937 0.1306

R-squared 0.143198 Mean dependent var 474.4691

Adjusted R-squared 0.111595 S.D. dependent var 792.4950
S.E. of regression 746.9682 Akaike info criterion 16.10850
Sum squared resid 1.36E+08 Schwarz criterion 16.24776
Log likelihood -2035.779 Hannan-Quinn criter. 16.16452
F-statistic 4.531108 Durbin-Watson stat 1.007475
Prob(F-statistic) 0.000016

We obtained R2 i.e. 0.143 from above regression

Results
c) LM TEST

LM = N.R2

LM=254*0.14 =35.56

CHSQ(0.05,9)=CHISQ.INV.RT(0.05,9)=16.9

As LM is greater than CHI Square , we have strong evidence to reject Ho and conclude
that errors are hetroskedastic.

d) F-Stats

As F-Stats is also greater than 3.5, we have strong evidence to reject Ho and conclude that
errors are hetroskedastic.
Dependent Variable: MS_CPI
Method: Least Squares
Date: 05/28/19 Time: 01:13
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

RECIP_CPI -157.3041 1.17E-12 -1.35E+14 0.0000

CC_CPI -0.000163 6.78E-19 -2.40E+14 0.0000
IP_CPI 2.597497 2.42E-14 1.08E+14 0.0000
RESID_CPI 1.000000 3.92E-15 2.55E+14 0.0000
C 1.418386 1.29E-14 1.10E+14 0.0000

R-squared 1.000000 Mean dependent var 0.471774

Adjusted R-squared 1.000000 S.D. dependent var 0.235250
S.E. of regression 9.44E-15 Sum squared resid 2.22E-26
F-statistic 3.93E+28 Durbin-Watson stat 0.043432
Prob(F-statistic) 0.000000
Transformation

Dependent Variable: MS_CPI

Method: Least Squares
Date: 05/28/19 Time: 00:42
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

CC_CPI -8.01E-05 2.50E-06 -32.05878 0.0000

IP_CPI 1.125683 0.183973 6.118741 0.0000
RESID_CPI 1.000686 0.033449 29.91715 0.0000
C 0.512021 0.094022 5.445770 0.0000

R-squared 0.883969 Mean dependent var 0.471774

Adjusted R-squared 0.882577 S.D. dependent var 0.235250
S.E. of regression 0.080613 Akaike info criterion -2.182688
Sum squared resid 1.624619 Schwarz criterion -2.126981
Log likelihood 281.2013 Hannan-Quinn criter. -2.160278
F-statistic 634.8665 Durbin-Watson stat 0.046038
Prob(F-statistic) 0.000000

genr ms_cpi=microsoft/cpi
genr cc_cpi=consumer_credit/cpi
genr ip_cpi=industrial_production/cpi
genr resid_cpi=resid/cpi
Dependent Variable: MS_CPI
Method: Least Squares
Date: 05/28/19 Time: 00:51
Sample: 1986M03 2007M04
Included observations: 254

Variable Coefficient Std. Error t-Statistic Prob.

RECI_CPI -157.3041 1.17E-12 -1.35E+14 0.0000

CC_CPI -0.000163 6.78E-19 -2.40E+14 0.0000
IP_CPI 2.597497 2.42E-14 1.08E+14 0.0000
RESID_CPI 1.000000 3.92E-15 2.55E+14 0.0000
C 1.418386 1.29E-14 1.10E+14 0.0000

R-squared 1.000000 Mean dependent var 0.471774

Adjusted R-squared 1.000000 S.D. dependent var 0.235250
S.E. of regression 9.44E-15 Sum squared resid 2.22E-26
F-statistic 3.93E+28 Durbin-Watson stat 0.043432
Prob(F-statistic) 0.000000

genr ip_cpi=industrial_production/cpi
genr reci_cpi=1/cpi
genr resid_cpi=resid/cpi
genr resid2=resid*resid
genr recip_cpi2=1/cpi*1/cpi
genr cc_cpi2=cc_cpi*cc_cpi
genr ip_cpi2=ip_cpi*ip_cpi
genr reci_cpi_cc_cpi=reci_cpi*cc_cpi
genr reci_cpi_ip_cp=reci_cpi*ip_cpi
genr cc_cpi_ip_cpi=cc_cpi*ip_cpi