Question

What can you say about Heteroscedasticity from the bptest I ran in R?
I was told that if the Breusch Pagan test gave you a small pvalue that you have heteroscedasticity, im just looking for clarification if this infact is a sign of heteroscedasticity.


> bptest(regmodel1)

        studentized Breusch-Pagan test

data:  regmodel1

BP = 15.692, df = 2, p-value = 0.0003913

Answer 1

Breusch-Pagan test is used to test for the existence of heteroskedasticity. The null hypothesis is that there is no heteroskedasticity or there exists homoscedasticity.

P value is used for accepting or rejecting the null hypothesis. If the P value is lower than the significance level that we are using (0.05 or 0.01 i.e., 5% or 1% level of significance) then we reject the null hypothesis. In other words, there exist heteroskedasticity.

In the present case the P value is 0.0003913 which is lower than 0.05 as well as 0.01. So, it means heteroskedasticity exist.