The Laplace Likelihood Ratio Test for Heteroscedasticity

Abstract EN

It is shown that the likelihood ratio test for heteroscedasticity, assuming the Laplace distribution, gives good results for Gaussian and fat-tailed data.

The likelihood ratio test, assuming normality, is very sensitive to any deviation from normality, especially when the observations are from a distribution with fat tails.

Such a likelihood test can also be used as a robust test for a constant variance in residuals or a time series if the data is partitioned into groups.