The error term in a regression equation is said to exhibit homoskedasticty if _____.
A)it has zero conditional mean
B)it has the same variance for all values of the explanatory variable
C)it has the same value for all values of the explanatory variable
D)if the error term has a value of one given any value of the explanatory variable

Question

Quizplus · Accepted Answer

Homoskedasticity means that the variance of the error term is constant for all values of the explanatory variable. Therefore, option B is the correct choice. Option A refers to zero conditional mean, which is a different concept. Option C is incorrect as it suggests that the error term is constant, which would violate the assumption of random error. Option D is incorrect as the error term is not fixed and can take on different values for different observations.

The Error Term in a Regression Equation Is Said to Exhibit