Heteroskedasticity

Definition

Health Economics

  • It is usually assumed in regression analysis (for example, ordinary least squares) that the error term has a constant variance. This will be true if the observations of the error term are assumed to be drawn from identical distribution s. But if the error term were to increase (or decrease) with each observation, this assumption would be invalidated and this is heteroskedasticity. Its converse is 'homoskedasticity'.
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