In the regression of y on x, the error term exhibits heteroskedasticity if _____.
A)it has a constant variance
B)Var(y|x) is a function of x
C)x is a function of y
D)y is a function of x

Question

Quizplus · Accepted Answer

Heteroskedasticity occurs when the variance of the error term is not constant across all values of x. In other words, Var(y|x) is a function of x. Option A describes homoskedasticity, where the error term has a constant variance. Options C and D describe a relationship between x and y, which is not related to heteroskedasticity.

In the Regression of Y on X, the Error Term