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Thread: testing regressions

  1. #1
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    testing regressions


    I have a very simple question:
    when I run a regression what are the things that I should test for to make sure that my regression is solid. Someone asked me whether there is co-integration in my regressions and was upset when i mentioned that i didn't test for them. I hope a practitioner can tell me :
    2-Heteroskedasticity , etc... without referring me to a textbook. I will figure out how to test for each by referring to textbooks but simply I want to fix my ideas and adopt the diagnostics that you would suggest as long as I run regressions.

  2. #2
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    Re: testing regressions

    Well, you should test for all the things a textbook would mention. Basically, you need to test the Gauss-Markov assumptions.
    It is, however, very data dependent which tests make sense. Usually an inspection of data will reveal the same things a test will tell you.
    For example, if your data is not trending there is no need to test for co-integration since co-integration is a test for equal stochastic trends.
    In practice it is not a very big issue, though, as most software packages will just give you a test summary which includes everything relevant.

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