Heteroscedasticity occurs when:
A) the variance of the random error is non-constant over the sample.
B) the regression coefficient estimates are highly unstable.
C) the random errors are correlated over time.
D) two or more explanatory variables are highly correlated.
E) the dependent and the explanatory variables are highly uncorrelated.

Question

Quizplus · Accepted Answer

Heteroscedasticity refers to the non-constant variance of the errors in a regression model. It is a violation of one of the assumptions of linear regression and can lead to biased and inefficient coefficient estimates. Options B, C, D, and E refer to other potential issues in a regression model but are not related to heteroscedasticity.

Heteroscedasticity Occurs When