Statistics MCQs, Data Analysis, Stat Software
Lecture notes about Heteroscedasticity, its consequences, detection, and remedy. Hetero or Heteroscedasticity is a violation of the OLS assumption of consistent variance.
The post is about Heteroscedasticity Tests and Remedies of Heteroscedasticity. There is a set of heteroscedasticity tests and remedies that require an assumption about the structure of the heteroscedasticity if it exists. That is, to use these tests you must choose a specific functional form for the relationship between the …
When heteroscedasticity is present in data, then estimates based on Ordinary Least Square (OLS) are subjected to The consequences of Heteroscedasticity are as follows All this means the standard errors will be underestimated and the t-statistics and F-statistics will be inaccurate, caused by several factors, but the main cause is …
The Goldfeld Quandt test is one of two tests proposed in a 1965 paper by Stephen Goldfeld and Richard Quandt. Both parametric and nonparametric tests are described in the paper, but the term “Goldfeld–Quandt test” is usually associated only with the parametric test.Goldfeld-Quandt test is frequently used as it is …
Heteroscedasticity Definition An important assumption of OLS is that the disturbances $u_i$ appearing in the population regression function are homoscedastic (Error terms have the same variance).i.e. The variance of each disturbance term $u_i$, conditional on the chosen values of explanatory variables is some constant number equal to $\sigma^2$. $E(u_{i}^{2})=\sigma^2$; where …