Question

True or False?

1. The null hypothesis for the Quandt-Andrews test is that there is a unit root.

2. The null hypothesis for the Breusch-Pagan test is that there is a unit root.

3. It is impossible to estimate a model with a linear trend term γ1t and a quadratic trend term γ2t^2 because of perfect collinearity.

Answer 1

1> False

Quandt andrews test is done to check for structural breakpoint in the data. The null hypothesis is that there is no breakpoints between t1 and t2.

2> False

The null hypothesis of the B-P test is that the error terms are homoskedastic, it does not have anything to do with stationarity or unit root test.

3> .False

They are not perfectly collinear. Perfect collinear means that there will be a linear combination ay+by^2 which will equal to zero. Here. we will not have any such a and b. Thus, they are perfectly related but they are not perfectly collinear.