Answered: Heteroskedasticity means that Group of…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Related questions

Question

Heteroskedasticity means that

Group of answer choices

Homogeneity cannot be assumed automatically for the model

The conditional variance of the error term is zero

The observed units have different values

The variance of the error term conditional on the explanatory variables is not constant

Expert Solution

Step 1: Defining the term

Heteroskedasticity in statistics and econometrics refers to a situation where the variability, or variance, of errors (the differences between observed and predicted values) in a regression model is not constant across all levels of the independent variables.

In simpler terms, it means that the spread or dispersion of these errors changes as the values of the independent variables change.

Heteroskedasticity can affect the efficiency of statistical tests and lead to incorrect conclusions in regression analysis, as it violates one of the assumptions of linear regression models.