Heteroskedasticity is phenomena wherein variability ofvariable is unequal and across entire range of values. If we plot scateerplot then it represents cone shaped diagram because of huge variance.
For example, age and income represent heteroskedasticity as age rises income rises and hence scatterplot shows up like cone.
In OLS regression we assume that equal weight is given to all observations, however due to presence of heteroskedasticity the cases with larger disturbances have more pull than other observations. Even the standard errors arebiased which causes another problem due to this. For example people with higher age jn above example will get better preference as they will have higher income and thus causes biasedness.
5. What do we mean by the term "heteroskedasticity"? Describe the consequences of heteroskedasticity for estimation and inference within the context of the classical linear regression model. How can we detect the presence of heteroskedasticity? Be specific. Should anything be done about heteroskedasticity if it is detected? If so, what should be done? Be specific. If not, why not? 5. What do we mean by the term "heteroskedasticity"? Describe the consequences of heteroskedasticity for estimation and inference within the context...
5. What do we mean by the term "heteroskedasticity"? Describe the consequences of heteroskedasticity for estimation and inference within the context of the classical linear regression model. How can we detect the presence of heteroskedasticity? Be specific. Should anything be done about heteroskedasticity if it is detected? If so, what should be done? Be specific. If not, why not? 5. What do we mean by the term "heteroskedasticity"? Describe the consequences of heteroskedasticity for estimation and inference within the context...
What would be the preferred test for Heteroskedasticity? Explain the steps in performing the test. Include all relevant steps.
12. What is heteroskedasticity, and what are the consequences of it? How do we detect heteroskedasticity?
What would be the preferred test for Heteroskedasticity? Explain the steps in performing the test. Include all relevant steps.
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