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

Question 16

Multiple Choice

The LM (Lagrange Multiplier) test generates a test statistic N * R2 ~ χ\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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