In Breusch Pagan test could someone explain me what is R^2 resid (R^2 from a second regression of the squared residual ) . I am not able to get an intuitive understanding how to arrive at the R^2 from second regression
If I remember correctly, the R^2 of the residuals is found by regressing the residuals onto the x-axis. Think of it this way. Imagine the graph. If the residuals are increasing in value (heteroskedastic), then they should get bigger the farther out the x-axis goes. If the size of the x-axis explains a lot about the size of the residuals (R^2), then the residuals stand a good chance of being heteroskedastic. I think the n multiplier is to increase the chances of heteroskedasticity as sample size increases. It’s irrelevant anyways, changes are low you’ll need to find the R^2 of the residuals on the test. It’ll be given to you! Just remember n*R^2 residuals and you’ll be good to go for the old chi-square test.
Thanks a ton grumble Now i can relate better to the residual plot and conditional heteroskedasticity