The LM (Lagrange Multiplier)test Generates a Test Statistic N $\chi$ ²_(S-1)

question 16

Multiple Choice

The LM (Lagrange Multiplier) test generates a test statistic N * R² ~ $\chi$ ²_(S-1) .To what does the S in this distribution refer?

• A)the number of explanatory variables in the auxiliary regression
• B)the number of explanatory variables in the initial model
• C)N-K-the degrees of freedom in econometric model of interest
• D)the statistical significance level chosen for the LM test

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