# 10.) Heteroskedasticity Flashcards

Heteroskedasticity is the violation of…

Classical Assumption V, which states that the observations of the error term are drawn from a distribution tha thas a constant variance.

Heteroskedasticity is important because…

OLS, when applied to heteroskedastic models, is no longer the minimum variance estimator (it still is unbiased however)

Heteroskedasticity is more likely to take place in…

cross-sectional models than in time-series models.

Heteroskedasticity can be divided into…

pure and impure versions

Pure heteroskedasticity is caused by…

the error term of the correctly specified equation

Impure heteroskedasticity is caused by …

a specification error such as an omitted variable

Pure heteroskedasticity refers to …

heteroskedasticity that is a function of the error term of a correctly specified regression equation

Pure heteroskedasticity occurs when…

classical assumption V, which assumes tha the variance of the error term is constant, is violated in a correctly specified equation

In homoscedasticity the error term has a constant variance, so..

the observation are continually drawn from the same distribution

The larger disparity between the size of observations of the dependent variable in a sample…

the larger the likelihood tha the error term observations associated with them will have different variances and therefore be heteroskedastic.

Discrete Heteroskedastic can be grouped visually into …

these two distributions “wide” & “narrow”

The variable Z is called a …

proportionality factor because the variance of the error term changes proportionally to the square of Zi.

The higher the value of Zi…

the higher the variance of the distribution of the ith observation of the error term.

Heteroskedastic distribution gets wider as…

Z increases

Homoskedastic distribution…

maintains the same width no matter what value Z takes.