TESTING FOR HOMOSCEDASTICITY & NORMALITY IN E VIEWS

GENERATING RESIDUALS AND FITTED VALUES IN E-VIEWS

Generating Residuals:
All you have to do is run a regression in E-views and E-views automatically saves the
residuals from the latest regression in a variable called resid.

How do you see

residual values?
Step 1: One way
to see a table of
residual and fitted
values is to first
run the regression
by going to
Quick/Estimate
Equation and
typing in the
equation into the
box and clicking
o.k.
Step 2: After the equation results
pop up click on the View box
in the equation results window.

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Step 3: Scroll down to Actual, Fitted, Residual and select actual fitted residual table.

Step 4: The actual, fitted residual table will look like this:
Next if
you
like
you can
copy
and
paste
the

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residual and fitted columns of data into Excel and plot Residual Vs. Predicted values.
Or you can do the following to do the plot in E-views.
PLOTTING RESID Vs. FITTED VALUES IN E-Views
Step1: Generate fitted values in E-views. Start with the estimation box and click on the
forecast button.

Next e-views will

generate a new
variable to store
the fitted values of
the dependent
variable. It
usually takes the
name of the
dependent
variable and adds
and F to it. SO
OUR FIITED
VARIABLE
WILL BE yf

Click on the OK
button and yf
will be created.

You will see a graph like the one below. This is NOT WHAT YOU WANT.

Next go up to the Quick

menu at the main E-views
toolbar. Scroll down to
Graph and select Scatter

Then type in Resid (type in a space) and yf and hit OK.

After you hit OK you get the desired graph of Resid Vs. Fitted values that you want!!

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GENERATING THE WHITE STAT FOR THE WHITE TEST
Step 1: From the regression equations results box click on View

Step 2: Scroll down to Residual Tests and click on White Heteroskedasticity no cross
terms

The output that follows gives you Whites Test statistic. If this number is larger than the
critical Chi-square value from the table you have a problem with Heteroskedasticity.

To Adjust the Standard Errors to account for Heteroscedasticity - from the

equation output window click on estimate and then click on OPTIONS.

Then check the box for Heteroscedasticty consistent coefficient covariance.

Then click OK a couple of times and you should get regression results with standard
errors that are adjusted for Heteroscedasticity

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GENERATING THE JARQUE-BERA STAT

Step 1: From the regression equations results box click on View

Step 2: Scroll down to Residual Tests and click on Histogram-Normality

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Step 3: Read the Jarque Bera stat to the right of the Histogram, if the number is bigger
than 5.99 (Chi-square with 2 df at the 5 % level) your error terms are not normally
distributed and you have a problem.

If you have a problem with normality consider using a transformation of the

dependent variable such as Log(Y), 1/Y, Suare Root(Y) etc.
If that does not work see your thesis advisor.