U i

Step 2. Ignoring the sign of £ii, that is, taking their absolute value \iii |, rank both \ uii \ and Xi (or Y) according to an ascending or descending order and compute the Spearman's rank correlation coefficient given previously.

Step 3. Assuming that the population rank correlation coefficient ps is zero and n > 8, the significance of the sample rs can be tested by the t test as follows16:

16See G. Udny Yule and M. G. Kendall, An Introduction to the Theory of Statistics, Charles Griffin & Company, London, 1953, p. 455.

CHAPTER ELEVEN: HETEROSCEDASTICITY 407

If the computed t value exceeds the critical t value, we may accept the hypothesis of heteroscedasticity; otherwise we may reject it. If the regression model involves more than one X variable, rs can be computed between \üi | and each of the X variables separately and can be tested for statistical significance by the t test given in Eq. (11.5.7).

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