FIGURE 5.7 Residuals from consumption-income regression.
hypothesis that the residuals from our consumption-income example are normally distributed. Incidentally, Figure 5.7 shows the parameters of the (normal) distribution, the mean is approximately 0 and the standard deviation is about 6.12.
Jarque-Bera (JB) Test of Normality.20 The JB test of normality is an asymptotic, or large-sample, test. It is also based on the OLS residuals. This test first computes the skewness and kurtosis (discussed in Appendix A) measures of the OLS residuals and uses the following test statistic:
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