We tested whether the homoscedastic
and heteroscedastic models could be assumed equivalent with a likelihood ratio test and reported the simpler model if we were able to accept the equivalence of the two models.
0](3) model is the best model, which implies that, out of the models taken into account, a three-factor homoscedastic
structure best describes the evolution of the yield curve in Colombia.
To assess whether the model is homoscedastic
, the Modified Wald test was applied.
distribution of the residuals varianceof the model is very important for the model to give good results.
As this was not the case, it was confirmed that the error term was homoscedastic
For a comparison of the results among three or more groups one-way analysis of variance and the post- hoc Tukey B test was performed for homoscedastic
Similarly Breusch-Godfrey LM test Engle's ARCH LM test and White's tests show that residuals are uncorrelated and homoscedastic
This equation holds for the case of homoscedastic
However, when using Baum's (2001) version of Hadri's test the null of stationarity in our panel is rejected at the 1% level under homoscedastic
, heteroscedastic and serial dependence assumptions (2).
The main advantage of GMM estimation is that the model need not be homoscedastic
and serially independent.
However, the data were not normally distributed, nor were the error terms homoscedastic