How does the Breusch-Pagan test check for heteroscedasticity in residuals?
- By comparing the variance of residuals
- By examining the correlation of residuals
- By plotting residuals against fitted values
- By regressing the squared residuals on the predictors
The Breusch-Pagan test checks for heteroscedasticity by regressing the squared residuals on the predictors. If the predictors explain a significant amount of variance in the squared residuals, the test concludes that heteroscedasticity is present.
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